You Credit Score: How's Your FICO?

Since we live in an automated, it's probably not that surprising that your ability to repay virtually any loan boils down to a single number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have a proprietary formula for building your credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, the differences aren't huge; all of the agencies use the following to build a credit score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Do you pay your bills on time?
  • Your Credit Card Balances - How many accounts? How much do you owe on your accounts?
  • 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. Each formula produces a single number which varies slightly by agency. Credit scores range from 300 to 800. Higher scores are better. Typical home buyers will likely find their FICO scores falling between 620 and 800.

Your FICO score greatly affects your monthly payment

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.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the score is entirely based on your lifelong credit history, it's hard to make a significant improvement in the score with quick fixes. (Of course you must have incorrect items removed from your credit report.)

How do I find out my credit score?

To raise your score, you must get the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that offered the first FICO credit score, offers FICO scores on myFICO.com. It's inexpensive to get your FICO from all three agencies, along with your credit report. 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 per year from the three major credit reporting agencies when you visit AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

Armed with this info, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Want to know more about your credit score? Give us a call at (207) 571-8034.