FICO - Your Credit Score

Because we live in an automated, you're probably not surprised to hear that your creditworthiness boils down to a single number. Credit reporting agencies use your history of paying all types of loans in order to compile this score.

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 each of the models considers a range of data available in your credit report, all of the agencies use the following to calculate your credit score:

  • Credit History - How long have you had credit?
  • History of Payments - Do you pay your bills on time?
  • Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report 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 may vary slightly from one agency to another. Credit scores range from 300 to 800. Higher is better. Typical home buyers likely find their scores falling above 620.

Your score affects your monthly payment

FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my FICO score?

What can you do to improve your FICO score? Unfortunately, not much. Since the FICO score is based on your lifelong credit history, it's very difficult to make a significant improvement in the number with quick fixes. You should, of course, appeal for the credit agency to remove any incorrect data from your credit report; this is the only "quick fix" for credit problems.

How do I find out my credit score?

Before you can improve your FICO score, you have to get your score and be sure that the credit reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. They also provide information and 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 a year from the three major credit reporting 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 information, 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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