About the FICO Credit Score

Since our society is so computer-driven, you're probably not surprised to hear that your creditworthiness comes down to one number. Credit reporting agencies use your payment history in order to create this score.

Experian, TransUnion, and Equifax, the three major credit agencies, each have their own proprietary formula for building 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 these methods vary, the differences aren't huge; all of the agencies use the following factors to calculate a score:

• Your Credit History - How long have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts do you hold, and how much do you owe?
• Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of giving you 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 range from 300 to 800. Higher is always better. Most borrowers who want to get a mortgage score 620 or above.

Credit scores make a difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my FICO 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. You should, of course, appeal for the credit agency to remove any incorrect reporting on your credit report; this is really the only "quick fix" for credit troubles.

Getting your FICO score

In order to improve your credit score, you've got to obtain the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO credit score, offers scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. They also provide information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report every year from all three agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

Armed with this info, 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 at (415) 456-7802.