Scoring your Credit - How's your FICO?
In today's increasingly automated society, it should come
as no surprise that when you apply for a mortgage, your ability
to pay can be reduced to a single number. All the years you've
been paying your mortgage, car payments, and credit card bills
can be analyzed, sliced, diced, spindled and mutilated into
a single indicator of whether you're likely to meet your future
obligations.
All three of the major credit reporting agencies (Equifax,
Experian and TransUnion) use a slightly different system to
arrive at a score. The best known is called the FICO score,
based on a model developed by Fair Isaac and Company (hence
the name) and used by Experian. Equifax's model is called
BEACON, while TransUnion uses EMPIRICA. While each of the
models considers a range of data available in your credit
report, the primary factors are:
- Credit History - How long have you had credit?
- Payment History - Do you pay your bills on time?
- Credit Card Balances - How much do you owe on how many
accounts?
- Credit Inquiries - How many times have you had your credit
checked?
Each of these, and other items, are assigned a value and
a weight. The results are added up and distilled into a single
number. FICO scores range from 300 to 800, with higher being
better. Typical home buyers likely find their scores falling
between 600 and 800.
FICO scores are used for more than just determining whether
or not you qualify for a mortgage. Higher scores indicate
you are a better credit risk, and thus may qualify for a better
mortgage rate.
What can you do about your FICO score? Unfortunately, not
much. Since the score is based on a lifetime of credit history,
it is difficult to make a significant change in the number
with quick fixes. The most important thing is to know your
FICO score and to ensure that your credit history is correct.
Conveniently, Fair Isaac has created a web site (www.myFICO.com)
that let's you do just that. For a reasonable fee, you can
quickly get your FICO score from all three reporting agencies,
along with your credit report. Also available is some helpful
information and tools that help you analyze what actions might
have the greatest impact on your FICO score. Each of the credit
services offers similar services on their web sites: www.equifax.com,
www.experian.com, and www.transunion.com.
Armed with this information, you will be a more informed
consumer and better positioned to obtain the most favorable
mortgage available to you.
F.A.Q
We offer a wide range of services including real estate sales,
financing, and property management. Call us today for a free
consultation @ 916-482-6899 or email us at fay@amerpropmgmt.com.
|
