About the FICO Credit Score

Since our society is so automated, you're probably not surprised to hear that your ability to repay your mortgage loan boils down to a single number. Credit reporting agencies use your loan payment history to create a FICO score.

TransUnion, Equifax, and Experian, the three major credit agencies, each have their own proprietary formula for building a credit score. The original FICO was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary, each agency uses the following to build your credit score:

  • Credit History - How many years have you had credit?
  • History of Payments - Do you have a history of late payments?
  • Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. The result is a single number: your credit score. Credit scores can be as low as 300 and as high as 800. Higher is better. Most folks getting a mortgage have a score above 620.

Credit scores make a big difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Can I raise my credit score?

Is it possible to raise your credit score? Since the FICO score is based on a lifetime of credit history, it's hard to significantly improve the number with quick fixes. (Of course you can and should have incorrect items removed from your credit report.)

Know your FICO score

To raise your credit score, you must have the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the original FICO score, sells FICO scores on its website: myFICO.com. For a reasonable fee, you can quickly get your FICO score from all three agencies, along with your credit report. Also available are information and tools that help you understand how to improve your FICO score.

You can get a federally-mandated free credit report every year from all three agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Curious about your FICO score? Give us a call: 630-717-3600.


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