FICO - Your Credit Score

Because we live in an automated, it should come as no surprise that your creditworthiness comes down to a single number. Credit reporting agencies use your loan payment history in order to create this score.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The original FICO was developed by Fair Isaac and Company. 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, all of the agencies use the following to determine your score:

  • Credit History - How many years have you had credit?
  • History of Payments - Do you pay your bills on time?
  • Credit Card Balances - How many accounts do you hold, and how much do you owe?
  • Inquiries on Your 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. 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. Typical home buyers will probably find their scores falling above 620.

Your score affects your interest rate

Credit 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 credit 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 formulated from your lifelong credit history, so it's not possible to raise it significantly in the short term. You should, of course, 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 score, you must get your score and be sure that the credit reports from each credit reporting agency are correct. Fair Isaac, the company that invented the original FICO credit score, offers scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three reporting agencies. Also available are information and online tools that help you improve your credit score.

You can get a federally-mandated free credit report every year from all three credit reporting agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Want to know more about credit scores? Call us: 425-508-9988.

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