You Credit Score: How's Your FICO?

Because we live in an automated, it's probably not that surprising that your creditworthiness boils down to a single number. This score is compiled by credit reporting agencies. These agencies use the payment history of all of your loans: mortgages, car/motorcycle loans, credit cards, etcetera.

The three credit reporting agencies use slightly different formulas to build a credit score. The original FICO model was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary, the differences aren't huge; all of the agencies use the following in calculating your score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • History of Payments - Do you have a history of late payments?
  • Your Credit Card Balances - How many accounts do you have? How much do you owe on your accounts?
  • Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

Each of these is assigned a value and a weight. The result is a single number: your credit score. Credit scores can be as low as 300 and as high as 800. Higher is better. Most people getting a mortgage loan in the current environment have a score above 620.

Not just for qualifying

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.

Can I improve my FICO score?

What can you do to raise your FICO score? Very little in the short term. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must have incorrect items removed from your credit report.)

Know your FICO score

In order to improve your credit 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, the corporation that invented the original FICO score, offers FICO scores on its website: myFICO.com. For a reasonable fee, you can get your FICO score from all three reporting agencies, along with your credit report. Also available are information and online tools that help you improve your credit score.

You can get a federally-mandated free credit report once per year from all three credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and inexpensive.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Curious about credit scores? Give us a call at 818-889-7300.

Basic Pre-Approval

Get the Best Mortgage Rate! Tell us a little about your current needs and we can use that information to match you with just the right loan.

Tell us about your loan needs.
How can we get in touch with you?
Tell us about your credit history.