About the FICO Credit Score

Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan boils down to just one number. This score is created by credit agencies. These agencies use the payment history from all of your loans: mortgages, car/motorcycle/boat loans, credit cards, etcetera.

Each of the three credit agencies has its own 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 these methods vary, all of the agencies use the following to determine your credit score:

  • Your Credit History - How long have you had credit?
  • History of Payments - Do you have a history of late payments?
  • Your Credit Card Balances - How many accounts do you hold, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which varies slightly by agency. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most people getting a mortgage score 620 or above.

Not just for qualifying

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 a better credit risk, and thus may qualify for a better mortgage rate.

Can I raise my FICO score?

Is there any way to raise your FICO score? Because the score is entirely based on a lifetime of credit history, it's very difficult to change it quickly. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

Before you can improve your credit score, you must obtain your score and make sure that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. They also provide helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

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

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

Curious about your FICO score? Give us a call at (512) 335-7800.

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