About the FICO Credit Score
Since our world is so automated, you're probably not surprised to hear that your creditworthiness boils down to one number.
This score is built by credit agencies. These agencies use the payment history from all of your loans: mortgages, car/motorcycle/boat loans, credit cards, etcetera.
All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit 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 the formulas vary, the differences aren't huge; they all use the following factors to build a score:
- Your 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 you had your credit checked for a loan?
These factors are assigned weights based on the formula being used. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Typical home buyers probably find their FICO scores above 620.
Your score affects how much you pay in interest every month
Did you know? Credit 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? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should appeal incorrect items on your credit report.)
Getting your credit score
To raise your FICO score, you must obtain the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO credit score, sells FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. Also available are helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.
You can get a free credit report once per year from all three agencies when you visit 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 will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about credit scores? Give us a call at (718) 639-9500.