About the FICO Credit Score

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Because we live in an automated, it should come as no surprise that your ability to repay your mortgage boils down to a single number. This score is built by credit agencies. These agencies use the payment history from all of your loans: mortgages, car/motorcycle loans, credit cards, et cetera.

Each of the three credit agencies has its own formula for building your credit score. The original FICO score 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 from one agency to another, all of the agencies use the following to build your score:

• Credit History - How many years have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Your Credit Card Balances - How many accounts? How much do you owe?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted a little bit differently depending on which formula the agency uses. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher scores are better. Most home buyers these days have a score above 620.

Your score greatly affects your interest rate

Did you know? 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.

Improving your score

What can you do to raise your FICO score? Very little in the short term. Because the FICO score is based on your lifelong credit history, it's difficult to change it quickly. You should, of course, appeal for the credit agency to remove any incorrect reporting from your credit report, which is the only way to quickly improve your credit score.

Getting your credit score

Before you can improve your FICO score, you must know your score and make sure that the reports from each reporting agency are correct. Fair Isaac, the corporation that invented the first FICO score, offers FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three reporting agencies. Also available are helpful information and 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 once a year from the three major agencies when you visit 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'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Want to know more about your FICO score? Call us at 303.727.2466.