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FICO Score and Credit Reports

All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a different system to arrive at a credit score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company ("FICO") 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. A score ofb 640 or better is typically needed to qualify for conventional financing, although a number of loan programs are available for lower scores.

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.

Since the FICO score is based on acumulated years 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.

You can get a free copy of your credit report (one per year) under a new federal law passed in 2004, by visiting:  www.annualcreditreport.com 

You can get your FICO score from all three reporting agencies, along with your credit report, by visiting:  www.myFICO.com. You will be charged a fee. This site also offers 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.