FICO - Your Credit Score

Since our society is so computer-driven, it's probably not that surprising that your creditworthiness boils down to a single number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 score:

  • Your Credit History - Have you had credit for years, or for a short time?
  • History of Payments - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many accounts? How much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on the formula being used. 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 is always better. Most home buyers these days have a score above 620.

Credit scores make a huge difference in your interest rate

Did you know? 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

Is there any way to raise your credit score? Despite what you hear from "credit repair" companies, the FICO score is built on your lifetime credit history, so you can't turn it around right away. You must remove any incorrect data from your credit report; this is the only way to quickly improve your credit score.

How do I find out my FICO score?

Before you can improve your FICO score, you must obtain your score and make certain that the credit reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the original FICO credit score, sells credit scores on its website: myFICO.com. It's inexpensive to quickly get your FICO from all three agencies, along with your credit report. Also available are helpful information and tools that help you improve your credit score.

You can get a free credit report every year from all three agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and inexpensive.

Armed with this info, 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 credit score? Call us: 425-508-9988.

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