About the FICO Credit Score
Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number.
The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary formula for building a credit 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, all of the agencies use the following to determine a credit score:
- Your Credit History - How long have you had credit?
- History of Payments - Have you paid more than 30 days late, and how often?
- Balances on your Credit Cards - How many accounts do you hold, and how much do you owe?
- Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?
Each of these is assigned a value and a weight. Each formula produces a single number which may vary a a little by agency. Credit scores range from 300 to 800. Higher is better. Most folks getting a mortgage loan these days score 620 or above.
Not just for qualifying
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 credit score?
Is there any way to improve your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must appeal for the credit agency to remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.
How do I find out my FICO score?
Before you can improve your score, you must know your score and make certain that the credit reports from each reporting agency are correct. Fair Isaac, the company that offered the original FICO score, offers FICO scores on myFICO.com. For a reasonable fee, you can quickly get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.
You can get a federally-mandated free credit report every year from the three major agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and very inexpensive.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.
Curious about your credit score? Give us a call at 703.255-5810.