The following example was accurate as of 06-26-2008

The higher your FICO® scores the less you can expect to pay for your loan. For example, on a $216,000 30-year, fixed-rate mortgage:

FICO® score..... Interest rate..... Monthly Payment
760 - 850 ......... 6.176% ............ $1,320
700 - 759 ......... 6.398% ............ $1,351
660 - 699 ......... 6.682% ............ $1,391
620 - 659 ......... 7.492% ............ $1,509
580 - 619 ......... 9.452% ............ $1,809
500 - 579 ........ 10.311% ............$1,945

As you can see in this example using average national rates, a person with a FICO® score of 760 or better will pay $189 less per month for a $216,000 30-year, fixed-rate mortgage than a person with a FICO® score of 620 - that's a savings of $2,268 per year.

You can see how essential improving your credit scores can be if they are low, and also how important it is to keep them high if they are good.

Monitor Your FICO® Score & Equifax Credit Report

In the United States, the best-known and most widely used credit score model is the FICO Score. FICO is the acronym for the Fair Isaac Corporation, the private corporation that created the FICO score. FICO scores are a number typically between 300 and 850. You have three FICO scores, one for each of the three credit bureaus - Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well.

Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time, therefore it is of utmost importance to know and constantly improve your personal FICO score.

In a nutshell: Higher FICO Scores = Lower Monthly Payments

FICO® Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your FICO® score.



These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Free FICO® Credit Score Estimator

Payment History

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage,
  etc.)


• Presence of adverse public records (bankruptcy, judgements, suits, liens,wage attachments, etc.), collection items, and/or delinquency (past due items)


• Severity of delinquency (how long past due)


• Amount past due on delinquent accounts or collection items


• Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)


• Number of past due items on file


• Number of accounts paid as agreed

Amounts Owed

• Amount owing on accounts


• Amount owing on specific types of accounts


• Lack of a specific type of balance, in some cases


• Number of accounts with balances


• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)


• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History

• Time since accounts opened


• Time since accounts opened, by specific type of account


• Time since account activity

New Credit

• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account


• Number of recent credit inquiries


• Time since recent account opening(s), by type of account


• Time since credit inquiry(s)


• Re-establishment of positive credit history following past payment problems

Types of Credit Used

• Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

To learn more about your credit visit myFICO's Credit Education Center

FICO® scores consider a wide range of information on your credit report. However, they do not consider:

• Your race, color, religion, national origin, sex and marital status.
  
  US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.


• Your age.
  
  Other types of scores may consider your age, but FICO® scores don't.


• Your salary, occupation, title, employer, date employed or employment history.
  
  Lenders may consider this information, however, as may other types of scores.


• Where you live.


• Any interest rate being charged on a particular credit card or other account.


• Any items reported as child/family support obligations or rental agreements.


• Certain types of inquiries (requests for your credit report).
  
  The score does not count "consumer-initiated" inquiries - requests
  you have made for your credit report, in order to check it. It also does not count "promotional inquiries" - requests made by lenders in order to make you a "pre-approved" credit offer - or "administrative
  inquiries" - requests made by lenders to review your account with them.
  Requests that are marked as coming from employers are not counted either.


• Any information not found in your credit report.


• Any information that is not proven to be predictive of future credit performance.


• Whether or not you are participating in a credit counseling of any kind.

To learn more about your credit visit myFICO's Credit Education Center

It's important to note that raising your FICO® credit score takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time.

Here are some tips on raising your credit score.

New Credit Tips

• Do your rate shopping for a given loan within a focused period of time.
  
  FICO® scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.


• Re-establish your credit history if you have had problems.
  
  Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.



• Note that it's OK to request and check your own credit report.
  
  This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization
  authorized to provide credit reports to consumers.
  
  --> Fico Scores/Reports
  

• Pay your bills on time.
  
  Delinquent payments and collections can have a major negative impact on your
  FICO® score.


• If you have missed payments, get current and stay current.
  
  The longer you pay your bills on time, the better your credit score.


• Be aware that paying off a collection account will not remove it from your credit report.
  
  
  It will stay on your report for seven years.


• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
  
  This won't improve your credit score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

Length of Credit History Tips

• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
  
  New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information.
  Also, rapid account buildup can look risky if you are a new credit user.
  

• Keep balances low on credit cards and other revolving credit
  
  High outstanding debt can affect a credit score.


• Pay off debt rather than moving it around.
  
  The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.


• Don't close unused credit cards as a short-term strategy to raise your score.


• Don't open a number of new credit cards that you don't need, just to increase your available credit.
  
  This approach could backfire and actually lower your credit score.

• Apply for and open new credit accounts only as needed.
  
  Don't open accounts just to have a better credit mix - it probably won't raise your credit score.



• Have credit cards - but manage them responsibly.
  
  In general, having credit cards and installment loans (and paying timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.


• Note that closing an account doesn't make it go away.
  
  A closed account will still show up on your credit report, and may be considered by the score.

myFICO is the division of Fair Isaac Corporation that invented the FICO score.

myFICO® is the only place where you can get your FICO® scores, the scores that lenders use, from all three credit bureaus. They also make available their FICO® Score Simulator, which shows you how actions like paying off an existing account or opening new accounts may affect your FICO® score.