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 over 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.
Charter Lending 6908 Summerbridge Drive Tampa, FL 33634-2255
Phone: (813) 514-4993 Fax: (813) 864-0341 E-mail: Dave@CharterLendingOnline.com
Building wealth through the intelligent, strategic use of mortgage financing