FICO Credit Scores: What Do They Mean?

Because we live in an automated world, you're probably not surprised to hear that your creditworthiness comes down to a single number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have a proprietary formula for building a credit score. Fair Isaac Company originally 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, each agency uses the following to build your credit score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • Payment History - Do you have a history of late payments?
  • Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?

Each of these factors 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 always better. Most home buyers in the current environment have a score above 700.

FICO makes a huge difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Raising your credit score

What can you do about your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the FICO score is built on your lifetime credit history, so it's not possible to raise it significantly in the short term.  You must appeal for the credit agency to remove any incorrect data from your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

To raise your FICO score, you must obtain the reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site ( that lets you do just that. It's inexpensive to quickly get your FICO from all three agencies, along with your credit report. They also provide information and online tools that help you understand how to improve your FICO score.

You can get a federally-mandated free credit report once per year from the three major agencies by visiting While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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.

Curious about credit scores? Give us a call: (585) 263-4353.