FICO - Your 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 boils down to a single number. All the years you've been 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.

Each of the three credit agencies has its own formula for building your 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 these methods vary from one agency to another, each agency uses the following to calculate a credit score:

  • Credit History - Have you had credit for many years, or for a short time?
  • History of Payments - Have you paid more than 30 days late, and how often?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which may vary slightly by agency. Credit scores can be as low as 300 and as high as 850. Higher scores are better. Most home buyers will probably find their FICO scores falling between 620 and 850.

Credit scores make a big 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.

Raising your credit score

Unfortunately, there isn't a lot you can do to immediately 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, of course, 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.

Getting your FICO score

To raise your score, you've got to have the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that invented the first FICO score, sells credit scores on myFICO.com. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and tools that can help you understand how to improve your credit score.

You can get a free credit report every year from all three agencies when you visit 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 right mortgage for you.

Curious about your FICO score? Call us at 813-966-1888.

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