How's your FICO Score?

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Since we live in an automated society, it's not surprising that your ability to repay your mortgage boils down to just one number. Credit reporting agencies use your loan payment history to compile your FICO score.

Each of the three credit agencies has its own 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 these methods vary from one agency to another, the differences aren't huge; all of the agencies use the following factors to build your score:

  • Credit History - Have you had credit for many years, or for just a short time?
  • Payment History - Do you pay your bills on time?
  • 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 lending you money?

Each of these is assigned a value and a weight. Each formula produces a single number which may vary a a little by agency. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Typical home buyers will likely find their scores above 620.

FICO makes a big difference in your interest rate

FICO 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.

Improving your 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 should 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.

Know your FICO score

Before you can improve your score, you have to get your score and be sure that the credit reports from each reporting agency are correct. Fair Isaac, the company that offered the original FICO credit score, sells scores on myFICO.com. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. Also available are helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a year from the three major agencies by visiting 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 information, you'll 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? Give us a call at 225 819 7670.

et the right mortgage for you.

Want to know more about your FICO score? Give us a call at 225 819 7670.