FICO - Your Credit Score
Because our society is so automated, it's probably not that surprising that your creditworthiness boils down to one number.
All the years you've been 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.
All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 these methods vary from one agency to another, the differences aren't huge; they all use the following to calculate your credit score:
- Credit History - How many years have you had credit?
- Payment History - Do you have a history of late payments?
- Balances on your Credit Cards - How many accounts do you hold, and how much do you owe?
- Requests for Credit - How many times have you had your credit checked for a loan?
Each of these is assigned a value and a weight. The result is a single number: your FICO score. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most people who want to get a mortgage these days have a score above 620.
FICO makes 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 a better credit risk, and thus may qualify for a better mortgage rate.
Can I improve my credit score?
Is it possible to improve your credit 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 have incorrect items removed from your credit report.)
Know your FICO
Before you can improve your credit score, you have to know your score and be sure that the reports from each reporting 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 as well as reports from all three credit reporting agencies. They also provide helpful information and online tools that can help you improve your FICO score.
You can get a free credit report once a year from the three major credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.
Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.
Want to know more about your FICO score? Call us: (203) 526-9345.