Scoring your Credit - How's your FICO?

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage loan boils down to a single number. Credit reporting agencies use your history of paying loans in order to build a FICO score.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building your 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, each agency uses the following to determine your score:

  • Your Credit History - How many years have you had credit?
  • Late Payments - Have you paid more than 30 days late, and how often?
  • Balances on your Credit Cards - How many accounts do you hold? How much do you owe?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted a little bit differently depending on the formula being used. Each formula produces a single number which varies slightly from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most borrowers getting a mortgage these days score 620 or above.

Your FICO score greatly affects how much you pay in interest every month

Did you know? 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.

Improving your score

Is it possible to improve your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should appeal incorrect items on your credit report.)

Getting your credit score

In order to raise your FICO score, you've got to get the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the first FICO credit score, offers FICO scores on its website: myFICO.com. For a reasonable fee, you can quickly get your FICO score from all three agencies, along with your credit report. Also available are helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from the three major credit reporting agencies when you visit AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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

Want to know more about your FICO score? Call us at (513) 713-1515.

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