About the FICO Credit Score

Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number. The FICO score is created by credit agencies. These agencies use the payment history of all of your loans: mortgages, car/motorcycle loans, credit cards, etcetera.

All three major 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 build your credit score:

  • Credit History - How many years have you had credit?
  • Late Payments - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many accounts? How much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these is assigned a value and a weight. Each formula produces a single number which may vary slightly from one agency to another. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most borrowers getting a mortgage these days score 620 or above.

Your FICO score affects your monthly payment

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Raising your FICO score

What can you do about your FICO score? Unfortunately, not much. So called "credit repair" companies advertise quick fixes, but the score is built on your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you must appeal incorrect items on your credit report.)

Getting your FICO score

To improve your FICO score, you must get the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the original FICO score, sells credit scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide information and tools that can help you improve your FICO score.

You can get a free credit report every year from the three major agencies by visiting 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'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Curious about your FICO score? Call us: (407) 889-4321.

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