How's your FICO Score?

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Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage loan boils down to a single number. The years of paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, the differences aren't huge; they all use the following factors in building your score:

• Credit History - Have you had credit for many years, or for just a short time?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you hold, and how much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on which formula the agency uses. The result is one number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers likely find their credit scores between 620 and 800.

FICO makes a huge difference in interest rates

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.

Can I raise my credit 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 lifetime credit history, so it's not possible to raise it significantly in the short term. You must, of course, remove any incorrect data from your credit report; this is really the only "quick fix" for credit troubles.

How do I find out my FICO score?

In order to improve your score, you must obtain the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that offered the first FICO score, sells FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three agencies. They also provide information and online tools that can help you understand how to improve your credit score.

You can get a federally-mandated free credit report every year from the three major 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.

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

Want to know more about your credit score? Call us: 877-799-4015.