How FICO Credit Scores Are Calculated

Since our society is so computer-driven, you're probably not surprised to hear that your creditworthiness comes down to a single number. Credit reporting agencies use your loan payment history to create this score.

Each of the three credit agencies has its own formula for building your credit score. The original FICO score was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary from one agency to another, the differences aren't huge; each agency uses the following to build a credit score:

  • Your Credit History - Have you had credit for years, or for just a short time?
  • Payment History - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts do you hold? How much do you owe on your accounts?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are weighted slightly differently depending on which formula the agency uses. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most home buyers have a score above 620.

Your credit score greatly affects your monthly payment

Did you know? Credit 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 about your FICO score? Unfortunately, not much. Because the FICO score is entirely based on your lifelong credit history, it is hard to change it quickly. (Of course you must have incorrect items removed from your credit report.)

Getting your credit score

To improve your FICO score, you must get the reports that are used to build it. Of course, you need the score as well. Fair Isaac has created a web site ( that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. Also available are helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting 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 most favorable mortgage.

Want to know more about your credit score? Give us a call at 512-592-5462.