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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 just a number. This number – your credit score – is a weighted calculation of your ability to meet credit commitments and a forecast of your anticipated bill-paying performance.
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 FICO score, based on a model developed by Fair Isaac and Company. While each of the models considers a range of data available in your credit report, the primary factors are:
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A Credit Score is Based on:
35% PAYMENT HISTORY
Are your payments made on time?
30% CREDIT BALANCE
How much do you owe?
15% LENGTH OF HISTORY
How long have you had credit?
10% NEW CREDIT
Have you recently added debts
or opened new accounts?
10% TYPES OF CREDIT
Credit Cards, unsecured loans,
Education, auto or home loans.
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FICO scores range from 300 to 800, with higher being better. Typical home buyers likely find their scores falling between 600 and 800.
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.
What can you do about your FICO score? The most important factor is to pay your bills on time. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to ensure that your credit history is correct.
Recent legislation has made it possible for consumers to check their credit report, and review it for any errors. Log on to www.AnnualCreditReport.com to receive a FREE copy of the data factors used in scoring your credit history. You can review this information for accuracy. If anything is mis-reported your Paramount mortgage banker can help you understand the steps involved in correcting it. | 
