FICO - Your Credit Score

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Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan comes down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, each agency uses the following to calculate a credit score:

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

These factors are assigned weights based on the formula being used. The result is one number. FICO scores can be as low as 300 and as high as 850. Higher is always better. Most home buyers these days have a score above 620.

Not just for qualifying

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the score is based on your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you can and should appeal incorrect items on your credit report.)

Getting your credit score

In order to improve your credit score, you must get the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. 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 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 all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Now that you have all the facts, you will 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 at (208) 726-5466.

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