How's your FICO Score?

Since we live in an automated, it should come as no surprise that your creditworthiness boils down to a single number. The FICO score is built by credit agencies. These agencies use the payment history of all of your loans: mortgages, car loans, credit cards, and the like.

Each of the three credit agencies has its own formula for building your credit score. Fair Isaac and Cooriginally developed this score. . Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA. While each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following factors in calculating your score:

  • Credit History - How long have you had credit?
  • Late Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe?
  • 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 results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most people who want to get a mortgage these days score 620 or above.

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. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my credit score?

Is there any way to raise your FICO score? Because the score is based on your lifelong credit history, it is difficult to change it quickly. (Of course you must remove incorrect data on your credit report.)

Getting your FICO score

In order to raise your credit score, you've got to have the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO credit score, sells scores on its website: myFICO.com. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. Also available are helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report every year from all three agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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

Want to know more about your FICO score? Call us at 630-717-3600.


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