About the FICO Credit Score

Because we live in a computer-driven world, it's probably not that surprising that your ability to repay virtually any loan boils down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit reporting agencies has its own formula for building your credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following in calculating a credit score:

• Your Credit History - Have you had credit for many years, or for a short time?
• Payment History - Have you paid more than 30 days late, and how often?
• Your Credit Card Balances - How many accounts? How much do you owe?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are weighted a little bit differently depending on the formula being used. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is better. Most borrowers getting a mortgage in the current environment have a score above 620.

Not just for qualifying

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 a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

How can you raise your credit score? Despite what you hear from "credit repair" companies, the FICO score is built on your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you can and should remove incorrect data on your credit report.)

How do I find out my credit score?

Before you can improve your credit 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 first FICO credit score, offers credit scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three agencies. Also available are information and online tools that can help you improve your credit score.

You can get a free credit report every year from the three major credit reporting agencies when you visit AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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

Curious about credit scores? Call us at (816) 916-7723.