You Credit Score: How's Your FICO?

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage loan boils down to a single number. The FICO score is compiled by credit reporting agencies. These agencies use the payment history of your various loans: credit cards, mortgages, car loans and others.

The three agencies use slightly different formulas to build a credit score. The original FICO score was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary, all of the agencies use the following to build a score:

  • Your Credit History - How long have you had credit?
  • Late Payments - Do you have a history of late payments?
  • Your Credit Card Balances - How many accounts? How much do you owe on your accounts?
  • Credit Inquiries - How many times have lenders pulled your credit report 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 range from 300 to 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

Credit scores make a big difference in your interest rate

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

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 built on your lifetime credit history, so you can't turn it around right away. (Of course you can and should appeal incorrect items on your credit report.)

How do I find out my FICO score?

Before you can improve your score, you must know your score and be sure that the reports from each agency are correct. 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 along with credit reports from all three reporting agencies. Also available are helpful 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 all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about your FICO score? Call us at (408) 626-1879.

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