About the FICO Credit Score

Since we live in an automated, you're probably not surprised to hear that your creditworthiness boils down to a single number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit reporting 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 the formulas vary, the differences aren't huge; all of the agencies use the following to build your score:

• Your Credit History - How many years have you had credit?
• Payment History - Do you have any payments later than 30 days?
• Credit Card Balances - How many accounts? How much do you owe?
• Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. Each formula produces a single number which varies slightly from one agency to another. FICO scores range from 300 to 800. Higher scores are better. Typical home buyers likely find their scores falling between 620 and 800.

Your FICO score affects 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.

Raising your credit score

What can you do to improve your FICO score? Unfortunately, not much. So called "credit repair" companies advertise quick fixes, but the FICO score is built on your lifetime credit history, so it's not possible to raise it significantly in the short term. You must, of course, remove any incorrect data from your credit report, which is the only "quick fix" for credit problems.

How do I find out my credit score?

Before you can improve your score, you must know your score and make sure that the credit reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide helpful information and tools that can help you improve your credit score.

You can get a free credit report once a year from the three major agencies by visiting 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 information, 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: (207) 571-8034.