A FICO score is a three digit number that is anywhere between 300 and 850 which was originally developed to determine an individuals credit worthiness (whether or not they should be approved for a loan). It’s since been used for anything from leasing applications to job applications.
Under US law each individual is entitled to one copy of their credit report from each of the credit bureaus every 12 months (read our guide on getting your free credit report), unfortunately this credit report does not contain any type of credit score which means that these bureaus are able to charge for these scores.
Every individual actually has three FICO scores, one for each credit bureau which is based on the data that’s found in your credit report from that bureau. When getting your FICO score it’s important to get all three scores to make sure there is not any big inaccuracies as these could hurt you getting your loans approved.
How To Get A Free FICO Score
There is only one place where you can get your FICO score from and that’s the official FICO website. If you’d like to get a general credit score instead we suggest reading out guide on free credit scores.
Checking your FICO score will not lower your score. You’ve probably read that credit enquiries (especially a lot in a short space of time) will negatively impact your credit score. This only true for hard inquiries, it’s only considered a hard inquiry when the inquiry is used to make a lending decision.Getting Your Free FICO Score Does NOT Lower Your Score
Checking your own FICO is considered a soft inquiry and as such won’t affect your credit score or appear on your credit report.
What’s So Important About Your FICO Score Anyway?
Your FICO score is so important because there is a link between a persons FICO score and delinquency rates (somebody becomes delinquent when they have a payment which is 90 days past due). In the table people you can see FICO score ranges and the delinquency rates for those scores:
|Score||Percentage Of Population||Delinquency Rate|
|800 or higher||11||1%|
As you can see, the higher your score the less likely you are to become delinquent. Lenders know this information so this is why you’ll most likely rejected for a loan if you don’t have a score of above 700, you’ll also not be offered the best rate of interest unless your score is above 720 (although some lenders actually make this best interest rate at a score of 76o or above).
Now that we why lenders are so fixated on FICO scores we can look at how much you’ll save over the life of your mortgage if you have a good FICO score. In the below chart we are assuming a 30 year fixed mortgage for $350,000, the best APR (annual percentage rate) in the market place is 3.716%.
|FICO Score Range||APR||Monthly Payment||Total Interest Paid|
|700-719||3.938% (+.222%)||$1,279 0.222||$247,047.43|
|675-699||4.115% (+.399%)||$1,305 0.399||$259,927.11|
|620-674||4.329% (+0.613%)||$1,338 0.613||$275,683.79|
|560-619||4.759% (+1.043%)||$1,404 1.043||$307,961.78|
|500-619||5.305% (+1.589%)||$1,491 2.233||$350,077.03|
As seen in the above table, even tiny changes in the rate of interest can add up very quickly costing you money. Somebody with a socre of 700-719 is likely to pay an additional $15950.32 than somebody with a score of above 760. Somebody with a score of 619 or below will struggle to get a loan at all, but if they do they will pay a $118,979.62 premium. This is why it’s so important to check your credit score before applying for a loan.
Improving Your FICO Score
Improving your score is something known as credit repair, depending on why you have a low score to begin with this repair can either be extremely easy or incredibly difficult. The first thing you’ll want to do is get a copy of all three of your credit reports, along with a score from each of the bureaus providing the reports. Then you have two options; the DIY option or going with a professional. We suggest going with a firm called lexingtonlaw, they have direct connections with two of the three credit bureaus and successfully get over 1.2million false items removed from credit reports each year. You can contact lexington law on 1-855-255-0044 or via their website by clicking here. If you do it yourself, you’ll need to go through each report and then dispute any inaccuracies.