You Credit Score: How's Your FICO?
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Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage comes down to just one number.
This score is created by credit reporting agencies. These agencies use the payment history of your various loans: credit cards, mortgages, car loans and others.
Each of the three credit reporting agencies has its own formula for building your credit score. Fair Isaac and Co originally 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 from one agency to another, the differences aren't huge; each agency uses the following to build a score:
- Your Credit History - How long have you had credit?
- Payment History - Do you have any payments 30 days late or later?
- Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
- Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?
These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. FICO scores can be as low as 300 and as high as 850. Higher scores are better. Most people who want to get a mortgage loan these days have a score above 620.
Credit scores make a difference in interest rates
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably less of a credit risk, and thus may qualify for a better mortgage rate.
Can I raise my FICO score?
How can you raise your credit score? Since the FICO score is entirely based on a lifetime of credit history, it is difficult to change it quickly. However, Fortune Financial Corporation offers a credit rescoring plan that gives a step by step guided catered to your specific credit situation. Each credit agency will give you instructions of what needs to be completed in order for your credit to be where you need it. With an 80%-90% accuracy, a rescoring plan will be sure to have you on your way to a new home!
How do I find out my credit score?
In order to improve your FICO score, you've got to have the reports that the agencies use to build it. Of course, you need the score as well. 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 as well as reports from all three reporting agencies. They also provide information and 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 once per year from all three credit reporting agencies at AnnualCreditReport.com. Getting it is fast and easy.
If all this sounds like too much work, let Fortune Financial Corporation help. We can pull your credit and point you in the right direction. Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.
Curious about credit scores? Give us a call: 731-925-9959.