How FICO Credit Scores Are Calculated

Shopping for a mortgage? We will be glad to assist you! Call us at 401-886-4261. Ready to get started? Apply Here.


Since we live in an automated society, it's not surprising that your ability to repay your mortgage boils down to a single number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building a credit score. The original FICO was developed by Fair Isaac and Company. Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA. While each of the models considers a range of data available in your credit report, the differences aren't huge; all of the agencies use the following factors in building a credit score:

  • Credit History - How long have you had credit?
  • History of Payments - Have you paid more than 30 days late, and how often?
  • Credit Card Balances - How many accounts do you hold? How much do you owe?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on which formula the agency uses. Each formula produces a single number which may vary slightly by agency. Credit scores range from 300 to 850. Higher is better. Most home buyers these days have a score above 620.

Credit scores make a huge difference in interest rates

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the score is built on your lifetime credit history, so you can't turn it around right away. (Of course you must remove incorrect data on your credit report.)

Know your FICO

Before you can improve your FICO score, you have to know your score and be sure that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. Also available are information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a year from the three major agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Armed with this information, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about credit scores? Call us at 401-886-4261.