FICO - Your Credit Score

Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage boils down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three credit 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; each agency uses the following to calculate a credit score:

• Your Credit History - Have you had credit for many years, or for a short time?
• Payment History - 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 on them?
• Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on the formula being used. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers likely find their FICO scores above 620.

Your FICO score greatly affects your interest rate

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

Improving your score

Is there any way to improve your FICO score? Since the score is based on your lifelong credit history, it's very difficult to change it quickly. You should, of course, remove any incorrect reporting on your credit report; this is really the only "quick fix" for credit troubles.

Getting your FICO score

Before you can improve your score, you have to get your score and be sure that the reports from each credit reporting agency are correct. 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 credit reports from all three credit reporting agencies. Also available are information and tools that can help you understand how to improve your credit score.

You can get a free credit report every year from the three major agencies by visiting AnnualCreditReport.com.

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 your FICO score? Call us at (925) 226-7130 or (209) 833-3338.