Your FICO Score

 

Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage loan boils down to a single number. The FICO score is built by credit reporting agencies. They use the payment history from all of your loans: credit cards, mortgages, car/boat loans and others.

Each of the three credit agencies has its own formula for building your credit score. Fair Isaac and Co originally developed this score. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, each agency uses the following to build a score:

  • Credit History - How long have you had credit?
  • Payment History - Do you pay your bills on time?
  • Balances on your Credit Cards - How many credit card accounts do you have and how much do you owe on them?
  • Requests for Credit - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which may vary a a little by agency. FICO scores range from 300 to 850. Higher is better. Most home buyers have a score above 620.

Your Credit Score Greatly Affects your Interest Rate

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Improving your Score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must remove any incorrect reporting from your credit report, which is the only "quick fix" for credit troubles.

How do I Find out my FICO Score?

In order to raise your score, you must have the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from the three major credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and very inexpensive.

Armed with this info, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.


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Elmira Savings Bank is an approved Seller/Servicer of Freddie Mac, FHA/Department of Housing & Urban Development, VA, USDA, and SONYMA (NY Only). Elmira Savings Bank is an Equal Housing Lender committed to ensuring every applicant for credit receive fair and equal treatment throughout the credit application and approval process, as embodied in the Equal Credit Opportunity Act and the Fair Housing Act. All mortgage lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Other restrictions and limitations apply.

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