About the FICO Credit Score
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Because we live in an automated, you're probably not surprised to hear that your ability to repay virtually any loan boils down to one number.
Credit reporting agencies use your history of paying loans to compile a FICO score.
Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary formula for building a credit score. The original FICO score was developed by Fair Isaac and Company.
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 EMPIRIUT. While these methods vary, each agency uses the following to calculate your score:
- Your Credit History - How many years have you had credit?
- Late Payments - Do you have a history of late payments?
- Balances on your Credit Cards - How many accounts do you have? How much do you owe?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
Each of these is assigned a value and a weight. Each formula produces a single number which may vary slightly from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher is better. Most home buyers have a score above 620.
Not just for qualifying
Did you know? 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 FICO score?
What can you do about your FICO score? Unfortunately, not much. 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.)
How do I find out my credit score?
Before you can improve your credit score, you must obtain your score and be sure that the credit reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.
You can get a 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.
Armed with this info, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Want to know more about your credit score? Call us at 1-801-7476-9176.