Scoring your Credit - How's your FICO?

Because our world is so automated, you're probably not surprised to hear that your creditworthiness boils down to a single number. Credit reporting agencies use your payment history in order to compile this score.

The three credit reporting agencies use slightly different formulas to build a credit score. The original FICO score 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 determine your score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
  • Credit Inquiries - How many times have you had your credit checked for 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 range from 300 to 800. Higher scores are better. Most people getting a mortgage have a score above 620.

Not just for qualifying

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 to raise 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 data on your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

In order to raise your FICO score, you've got to obtain the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. Also available are helpful information and tools that can 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 credit reporting agencies when you visit 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 get the right mortgage for you.

Curious about your credit score? Give us a call: (860) 658-7100.

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