Since we live in an automated, it’s probably not that surprising that your ability to repay your mortgage loan comes down to a single number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, spindled and mutilated into a single indicator of whether you’re likely to meet your future obligations.
Each of the three credit reporting agencies has its own formula for building your credit score. The original FICO score was developed by Fair Isaac and Company. Experian uses this model and calls its score FICO. Equifax’s model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA. While each of the models considers a range of data available in your credit report, the differences aren’t huge; all of the agencies use the following factors in calculating your credit score:
Each of these is assigned a value and a weight. The result is a single number: your credit score. FICO scores range from 300 to 800. Higher is better. Most home buyers have a score above 620.
FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.
What can you do to improve your FICO score? Very little in the short term. Some companies promise quick fixes, but they can’t do anything different than what you can do — for free. (Of course you must have incorrect items removed from your credit report.)
Before you can improve your score, you have to get your score and make sure that the credit reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO score from all three agencies, along with your credit report. They also provide information and tools that help you understand how to improve your credit score.
You can get a federally-mandated free credit report every year from all three credit reporting agencies at AnnualCreditReport.com. You won’t get a free credit score from AnnualCreditReport.com, but getting it 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 get the right mortgage for you.
Licensed in Colorado as Maestro LLC (DBA Mortgage Maestro Group) is an Equal Housing Lender.
387 N Corona St #646, Denver, CO 80218.
NMLS Unique Identifier #1838215
Consumers wishing to file a complaint against a company or a residential Mortgage loan originator should complete and send a complaint form to the Texas department of savings and mortgage lending, 2601 North Lamar, suite 201, Austin, Texas 78705. Complaint forms and instructions may be obtained from the Department’s website at www.sml.texas.gov. A toll-free consumer hotline is available at 1-877-276-5550. The department maintains a recovery fund to make payments of certain actual out of pocket damages sustained by borrowers caused by acts of licensed residential mortgage loan originators. A written application for reimbursement from the recovery fund must be filed with and investigated by the department prior to the payment of a claim. For more information about the recovery fund, please consult the department’s website at www.sml.texas.gov.
Home Mortgage Disclosure Act Notice. The HMDA data about our residential mortgage lending are available online for review. The data show geographic distribution of loans and applications; ethnicity, race, sex, age and income of applicants and borrowers; and information about loan approvals and denials. HMDA data for many other financial institutions are also available online. For more information, visit the Consumer Financial Protection Bureau’s website.
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