All About FICO (con’t)
There are about 100 different ways to compute a credit score. As we have discussed FICO is the main source lenders use to derive a credit score. FICO has 49 different algorithms that are split across different industries such as Mortgage, Auto, Financial, etc.
In the mortgage industry there are 9 different algorithms devised for the mortgage industry. When a mortgage credit report is pulled there are three FICO scores computed by data provided by each of the three bureaus––Experian, TransUnion and Equifax. The mortgage loan officer or broker will use the middle of the three scores. This is commonly known as a mid score.
Other industries may only pull one of the three bureaus and apply a specific algorithm to this data to compute a credit score. This is the reason you need to focus on the credit on all three credit bureaus.
Fair Isaac has become so important in the financial industry that their word on your credit has become basically the final word. Why would banks and creditors place so much credibility into one company? The answer is simply because of their proven track record.
The FICO score has proven to be not only an accurate and amazingly consistent way of showing a person’s credit reliability, but it has also saved companies millions of dollars in credit write-offs due to bad lending decisions. A study of loans that were granted and/or denied simply due to the FICO scores shows that Fair Isaac has been right over 80 percent of the time.
Of course, that required some chance taking on the part of many creditors, but they were willing to take the risk. After all, this was a ground-breaking thing determining credit worthiness through a simple three-digit number. Many companies jumped “on the bandwagon” just to show that Fair Isaac had the right idea.
Fast forward to the twenty-first century and you will find that FICO has become the definitive when it comes to financial and credit matters. They have proven their reliability and their worthiness just through trial and error.
Unfortunately, the problem is that finding your FICO score isn’t as easy as you think. The truth is that it’s not even shown on your credit report like you would think. In fact, for years and years, your credit score was a securely kept secret number that was elusive to the average person.
So how can you find out your credit score? The best resource for tracking your FICO score is using MyFICO.com. They will show you the different scores across the different industries. This is a pricey option and can still be confusing. The main score they show is a FICO8 score and as far at this author knows, is not used in any lending decisions. You have to drill down to see the specific scores for the various industries.
We do recommend to continually monitor your credit using a credit monitoring service. The scores may not be FICO scores, but they give a good idea of your scores for tracking purposes.
Check your 3 bureau credit scores
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