How FICO Credit Scores Are Calculated

Because we live in a computer-driven world, you're probably not surprised to hear that your ability to repay your mortgage loan comes down to one number. The FICO score is compiled by credit reporting agencies. They use the payment history from your various loans: mortgages, car/motorcycle/boat loans, credit cards, etcetera.

Each of the three credit agencies has its own formula for building your 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 each of the models considers a range of data available in your credit report, the differences aren't huge; they all use the following factors to calculate your score:

  • Credit History - How long have you had credit?
  • History of Payments - Do you have a history of late payments?
  • Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?

Each of these 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 always better. Most home buyers likely find their credit scores between 620 and 800.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Can I improve my credit score?

What can you do to improve your FICO score? Unfortunately, not much. Despite what you hear from "credit repair" companies, the score is calculated from your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you must remove incorrect data on your credit report.)

Getting your FICO score

To improve your score, you must get the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the first FICO score, offers credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. They also provide helpful information and tools that can 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 all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast 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 right mortgage for you.

Want to know more about your credit score? Call us at 8139881776.

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.

English Spanish