Your FICO Score
Your FICO score is taken from years of your credit history using the Fair Isaac and Company model. You will have a score with each of three major credit reporting agencies using slightly different models to calculate your score. Experian uses FICO, Equifax’s uses BEACON and TransUnion uses EMPIRICA. Scores in the 650 range are common but range between 300 and 850.
A consultation with a good lender about methods to improve and maintain your credit scores can help you get on track and keep you there. These scores show the type of loan and interest rate you may qualify for when applying for your mortgage.
Factors for reviewing your FICO score include:
- Types of Credit – A healthy mix of credit cards and loans is good.
- Payment History -Have you kept all payments on time and current?
- Credit to Debt Ratio – This is the ratio of what you owe compared to how much credit is available to you.
- Credit Inquiries – how often has your credit history been accessed by someone other than you?
You can find out more about FICO scores at www.myFICO.com, Fair Isaac’s informational site and once per year, for free, you can review all three of your credit reports at www.annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: www.equifax.com, www.experian.com and www.transunion.com.
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Tips to Help Your FICO Score
- Apply for service station cards or department store credit. If you have non-existent or below average credit, gas and retail credit cards are a way to establish credit history, increase your limits, and establish a solid payment history to raise your FICO score. Avoid holding a large balance for more than couple of months. These types of cards typically charge high interest rates.
- Keep your cards in rotation. Whether you’re just getting started with credit, or have older cards, be sure to keep your credit card accounts active, paying them off in just a couple of payments.
- Pay on time. Your FICO score plummets with each account that goes to collections. It’s where people who experienced recent unemployment witness the biggest hit in their credit score. Yes, it takes longer to rebuild credit with payment history, but is the best way to show your lender that you’re able to make payments on a mortgage..
- Check that your credit history is correct. If you find mistakes on your credit report, write to the bureau requesting to have the error removed. When you and a family member have a name in common, be extra sure that the activity is reported accurately.
- Even out your debt. At first, this doesn’t sound like a good idea. But, you steer clear of having one card that is maxed out and have your remaining cards at a zero balance. It’s better to have each of your cards at a lower balance than to have the majority of your debt taking up the balance a single card.