How FICO Credit Scores Are Calculated


	Are you looking for a new mortgage loan? We'll be glad to discuss our many mortgage solutions! Call us at 210-257-0642 ext. 17. Ready to begin? Apply Here.

Since we live in an automated world, it's not surprising that your ability to repay your mortgage comes down to a single number. This score is built by credit reporting agencies. They use the payment history of all of your loans: credit cards, mortgages, car/boat loans etcetera.

Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary formula for building your 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 each of the models considers a range of data available in your credit report, the differences aren't huge; they all use the following factors in calculating your credit score:

Credit History - How long have you had credit?
History of Payments - Have you paid more than 30 days late, and how often?
Balances on your Credit Cards - How many accounts do you hold? How much do you owe?
Credit Inquiries - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted a little bit differently depending on the formula being used. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most people who want to get a mortgage loan in the current environment have a score above 620.

Credit scores make a big difference in interest rates

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.

Raising your FICO score

Is it possible to improve your FICO score? 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.)

Getting your credit score

In order to improve your score, you've got to obtain the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the corporation that invented the original FICO credit score, sells FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three agencies. Also available are information and tools that can help you improve your FICO score.

You can get a free credit report every year from all three 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.

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

Curious about your FICO score? Call us at 210-257-0642 ext. 17.

Our Mission is to help you find the best mortgage program for your short and long-term goals. The loan process can be intimidating and frustrating, and there are many new disclosure forms that can be confusing. Barbara and Don Coker promise a level of personal service that you can't get through an anonymous internet lender. We are Texas residents, and both Affiliates of the Year at the San Antonio Board of Realtors. Our 25+ years of service to Texas Homeowners speaks to our commitment and professionalism. Call us at 210-842-4185 for honest advice. We are here for you!