About the FICO Credit Score

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Because we live in a computer-driven world, it's probably not that surprising that your creditworthiness comes down to one number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three credit 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 the formulas vary, the differences aren't huge; they all use the following to build a score:

• Credit History - How long have you had credit?
• Payment History - Do you have any payments later than 30 days?
• Credit Card Balances - How many credit card accounts do you have, and how much do you owe?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on which formula the agency uses. Each formula produces a single number which may vary slightly by agency. FICO scores range from 300 to 800. Higher is better. Most home buyers will probably find their scores between 620 and 800.

Credit scores make a huge difference in interest rates

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.

Raising your FICO score

What can you do about your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should, of course, appeal for the credit agency to remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.

Getting your FICO score

To improve your credit score, you've got to obtain the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that offered the original FICO credit score, offers FICO scores on myFICO.com. For a reasonable fee, you can get your FICO score from all three reporting agencies, along with your credit report. They also provide information and online tools that help you improve your FICO score.

You can get a free credit report once per year from all three credit reporting agencies at AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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.

Want to know more about credit scores? Call us: 303-596-8672.