About the FICO Credit Score

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Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage comes down to a single number.Credit reporting agencies use your payment history to create your FICO score.

The three agencies use slightly different formulas to build a credit score. The original FICO score was developed by Fair Isaac and Company.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 these methods vary, each agency uses the following to build your score:

  • Your Credit History - How many years have you had credit?
  • Payment History - Do you pay your bills on time?
  • Credit Card Balances - How many accounts? How much do you owe?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted a little bit differently depending on the formula being used. Each formula produces a single number which may vary slightly by agency. FICO scores range from 300 to 800. Higher is always better. Most home buyers these days have a score above 620.

FICO makes a difference in your interest rate

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 improve my FICO score?

Is there any way to improve your credit score? Since the credit score is based on a lifetime of credit history, it's very difficult to make a significant change in the number with quick fixes. (Of course you can and should appeal incorrect items on your credit report.)

How do I find out my credit score?

In order to improve your FICO score, you must have the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. They also provide helpful information and tools that can help you improve your FICO score.

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

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Curious about your credit score? Call us at 800-506-0632.