How FICO Credit Scores Are Calculated

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Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan comes down to just one number. Credit reporting agencies use your history of paying all types of loans to create a FICO score.

The three credit reporting 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 each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following factors to build your score:

  • Credit History - Have you had credit for years, or for just a short time?
  • Late Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on which formula the agency uses. The result is a single number: your credit score. FICO scores range from 300 to 850. Higher is better. Typical home buyers likely find their FICO scores falling above 620.

Credit scores make a huge difference in interest rates

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.

Raising your FICO score

What can you do to improve your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must remove incorrect data on your credit report.)

How do I find out my FICO score?

Before you can improve your FICO score, you have to know your score and be sure that the credit reports from each reporting agency are correct. Fair Isaac, the company that offered the original FICO credit score, offers credit scores on For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and tools that help you improve your credit score.

You can get a free credit report once a year from the three major credit reporting agencies by visiting These reports do not include a free score, but it's very inexpensive to get one at the same time.

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.

Curious about credit scores? Give us a call: 407-496-3555.

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