FICO - Your Credit Score
Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage comes down to just one number.
Credit reporting agencies use your loan payment history to build your FICO score.
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 each of the models considers a range of data available in your credit report, each agency uses the following to determine your score:
- Credit History - How long have you had credit?
- Late Payments - Have you paid more than 30 days late?
- Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe on them?
- Credit Inquiries - How many times have lenders pulled your credit for the purpose of lending you money?
These factors are weighted differently depending on which formula the agency uses. Each formula produces a single number which may vary a a little by agency. Credit scores can be as low as 300 and as high as 800. Higher is better. Most people getting a mortgage these days score 620 or above.
Your FICO score greatly affects how much you pay in interest every month
Did you know? 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.
Improving your score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the FICO score is based on your lifelong credit history, so you can't turn it around right away. You must remove any incorrect reporting from your credit report, which is the only way to quickly improve your credit score.
How do I find out my credit score?
To improve your credit score, you must get the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that invented the first FICO score, offers FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three reporting agencies. Also available are 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 a year from the three major credit reporting 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.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Want to know more about your FICO score? Give us a call: 562 320-0510.