FICO Scores -- An Introduction

The FICO Score is a score assigned by the credit reporting agencies that summarizes their view of how trustworthy (creditworthy) we are.  The score varies depending upon our credit limits, debt load, payment history, number of lines of credit, etc. 

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Credit Score (also known as a FICO Score):

1. Impact our ability to get pre-approved for a mortgage
2. Have a large effect on the interest rate we pay for mortgages and all other credit
3. Affect the rate we pay for insurance for our home and car
4. Influence our down payment requirements

Credit scores range from 300-850 and each credit reporting agency has a different formula to calculate our credit score.  Although our credit score is a contributing factor in obtaining financing to purchase a home, it is not the main factor.  Sophisticated mortgage lenders look at a variety of factors and they are often able to help us get mortgage approval by tailoring the loan to our unique situation.  Even if you feel your credit score is a problem, it still makes sense to speak to an excellent lender about your situation.

Each of us is entitled to receive one free credit report from EACH of the three credit reporting agencies every year.  Although we can obtain our credit report from each credit reporting agency, they will charge us a small fee to receive our credit score.  The free reports can be obtained by logging on to:  www.annualcreditreport.com or by contacting each credit agency individually.  They are Experian.com or 888-397-3742, Transunion.com or 800-888-4213, and Equifax.com or 800-685-1111.

Improving your credit score is a valuable objective.  There are many good books on the subject and the Suze Orman show on CNBC has many great ideas about money management and improving your FICO score.