How's your FICO Score?

Since we live in an automated society, it's not surprising that your ability to repay your mortgage comes down to just one number. This score is compiled by credit agencies. They use the payment history of your various loans: mortgages, car/motorcycle/boat loans, credit cards, and others.

The three credit reporting agencies use slightly different formulas to build a credit 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, each agency uses the following to build a credit score:

  • Your Credit History - Have you had credit for many years, or for just a short time?
  • History of Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. The result is a single number: your credit score. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers have a score above 620.

Credit scores make a big difference in your interest rate

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

Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the score is formulated from your lifelong credit history, so you can't turn it around right away. (Of course you must have incorrect items removed from your credit report.)

Getting your FICO score

To raise your FICO score, you must have the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the first FICO score, offers credit 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. They also provide information and online tools that help you improve your FICO score.

You can get a federally-mandated free credit report once a year from all three 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'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about credit scores? Give us a call: 7186399500.

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Channel Mortgage LLC

Connecting the Dots to Home Ownership

55-25 69th Street 1st Floor
Maspeth, NY 11378-1806