How FICO Credit Scores Are Calculated

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage comes down to just one number. The FICO score is compiled by credit reporting agencies. These agencies use the payment history from your various loans: credit cards, mortgages, car/boat loans and the like.

The three agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary, all of the agencies use the following to determine your credit score:

  • Credit History - How long have you had credit?
  • Late Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts do you hold, and how much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you 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 800. Higher is better. Most home buyers in the current environment have a score above 620.

Your FICO score greatly affects your monthly payment

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Can I improve my credit score?

What can you do to raise your FICO score? Unfortunately, not much. Since the FICO score is entirely based on a lifetime of credit history, it's very difficult to change it quickly. You must, of course, remove any incorrect reporting on your credit report; this is the only way to quickly improve your credit score.

Getting your FICO score

In order to improve your credit score, you've got to obtain the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that offered the original FICO credit score, offers FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. They also provide information and tools that can help you improve your FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and inexpensive.

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

Want to know more about your FICO score? Call us: (510) 683-9850.

Basic Pre-Approval

Get the Best Mortgage Rate! Tell us a little about your current needs and we can use that information to match you with just the right loan.

Tell us about your loan needs.
How can we get in touch with you?
Tell us about your credit history.