About the FICO Credit Score

Because our society is so computer-driven, it should come as no surprise that your ability to repay virtually any loan comes down to a single number. Credit reporting agencies use your payment history in order to compile a FICO score.

The three reporting agencies use slightly different formulas to build a 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, the differences aren't huge; each agency uses the following factors in calculating a credit 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 credit card accounts do you have, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on which formula the agency uses. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most people who want to get a mortgage score 620 or above.

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

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

Can I improve my FICO score?

What can you do about your FICO score? Unfortunately, not much. Because the FICO score is based on a lifetime of credit history, it's difficult to significantly improve the number with quick fixes. You must, of course, appeal for the credit agency to remove any incorrect data on your credit report; this is really the only "quick fix" for credit troubles.

Getting your credit score

Before you can improve your FICO score, you have to obtain your score and make sure that the credit reports from each 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. Also available are information and tools that help you understand how to improve your credit score.

You can get a free credit report once per year from all three credit reporting agencies when you visit AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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.

Curious about your FICO score? Give us a call at 425-508-9988.

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