About the FICO Credit Score

Because our society is so computer-driven, you're probably not surprised to hear that your creditworthiness comes down to a single number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three reporting agencies use slightly different formulas to build a credit score. The original FICO model was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, the differences aren't huge; they all use the following in building a score:

  • Your Credit History - How long have you had credit?
  • Payment History - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many accounts do you hold? How much do you owe?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. The result is one number. Credit scores range from 300 to 800. Higher is always better. Most folks who want to get a mortgage have a score above 620.

FICO makes a huge difference in your interest rate

Did you know? Credit 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.

Can I raise my FICO score?

What can you do about your FICO score? Very little in the short term. Since the FICO score is based on your lifelong credit history, it's hard to change it quickly. You must remove any incorrect data on your credit report, which is the only "quick fix" for credit troubles.

How do I find out my credit score?

Before you can improve your FICO score, you have to know your score and ensure that the 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 quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and tools that help you understand how to improve your credit 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. 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'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Curious about credit scores? Call us: 562 320-0510.

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