About the FICO Credit Score

Since our society is so automated, it's probably not that surprising that your ability to repay virtually any loan boils down to one number. Credit reporting agencies use your loan payment history in order to compile a FICO score.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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 each of the models considers a range of data available in your credit report, each agency uses the following to determine a credit score:

  • Your Credit History - How long have you had credit?
  • History of Payments - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many accounts do you hold, 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. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most home buyers these days have a score above 620.

Not just for qualifying

Did you know? 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.

Raising your FICO score

Is there any way to improve your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must remove incorrect data on your credit report.)

Getting your FICO score

Before you can improve your credit score, you must get your score and ensure that the reports from each agency are correct. Fair Isaac, the corporation that offered the original FICO credit score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three reporting agencies. Also available are information and online tools that can help you understand how to improve your FICO score.

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

Armed with this information, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Want to know more about your FICO score? Call us: (334) 285-8850.

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