Credit scores what do they mean
FICO Credit Scores: What Do They Mean?
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Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage loan comes down to a single number. Credit reporting agencies use your history of paying all types of loans in order to build this score.
All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. F air I saac 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 each of the models considers a range of data available in your credit report, the differences aren't huge; all of the agencies use the following to build a score:
- Credit History - How many years have you had credit?
- Late Payments - Do you pay your bills on time?
- Your Credit Card Balances - How many accounts do you have? How much do you owe on your accounts?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?
Each of these is assigned a value and a weight. The result is one number. FICO scores range from 300 to 850. Higher scores are better. Most people getting a
mortgage loan these days have a score above 620.
Not just for qualifying
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.
Improving your score
What can you do about 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 can and should have incorrect items removed from your credit report.)
Know your FICO score
Before you can improve your FICO score, you must know your score and make certain that the reports from each reporting agency are correct. Fair Isaac, the company that invented the first FICO score, offers credit scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three agencies. Also available are information and online 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 the three major agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, 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 credit score? Give us a call at 512-302-9410.Source: www.longhornmortgage.net