Scoring your Credit - How's your FICO? See below for Credit Improving Tips

In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.  All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:

Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800, with higher being better. Typical home buyers likely find their scores falling between 600 and 800.  Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

What can you do to IMPROVE your FICO score?   (1) Pay your bills on time by signing up for automatic payment with the creditor or by signing up for automatic bill payments through your bank, who in turn will mail a check to your creditor by a date certain on a monthly basis (this is good for bills that are the sam every month) - there is no extra charge for signing up for these auto pay features either through the creditor or your bank.  Also it is particulalry important that all mortgages have no more than one 30-day late payment in the last 12 months, and no late payments in the last 90 days.      (2) Also try to make sure that all your revolving lines of credit are not extended for more than half the amount of the credit line.  Credit bureas view lines of credit extended to 50% or more of the credit line as maxed out.  (3) Also if you are married, the middle score of the married person is used.  So if you are the spouse that makes more money, take yourself off  any joint credit lines that are not in good standing, or that have recent late payments on them.  (4) Also don't make any major purchases until after you purchase the property you want (i.e. after escrow is closed).  (5)  If you have a bankruptcy it takes approximately 2 years of establishing good credit for lenders to consider loaning you money. This means not only keeping your current accounts in good standing, but also opening up new credit lines (i.e. open up a new gas credit card - this way you can only purchase gas on the new credit line and won't be tempted or able to go further into debt).  (6) If trying to determine which credit lines to close, leave the ones that are the oldest open - it shows that you have established credit.

The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site (www.myFICO.com) that let's you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.

Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.