FICO - Your Credit Score

Since we live in an automated, it should come as no surprise that your ability to repay your mortgage loan comes down to one number. This score is built by credit agencies. They use the payment history of all of your loans: credit cards, mortgages, car loans and others.

The three reporting agencies use slightly different formulas to build a 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 these methods vary, all of the agencies use the following to determine a credit score:

• Credit History - How long have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Your Credit Card Balances - How many accounts do you hold, and how much do you owe?
• Requests for Credit - 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 one number. Credit scores range from 300 to 800. Higher is better. Most home buyers in the current environment have a score above 620.

Credit scores make a huge difference in interest rates

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Improving your score

What can you do to raise your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the score is calculated from your lifelong credit history, so it's not possible to raise it significantly in the short term. (Of course you can and should appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your FICO score, you have to obtain your score and be sure that the reports from each reporting agency are correct. Fair Isaac, the corporation that offered the first FICO credit score, offers 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 online tools that can 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. These reports do not include a free 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.

Curious about your FICO score? Call us: (207) 571-8034.