FICO® and your Credit Score

By | July 14, 2013

Have you heard of FICO®? FICO® stands for Fair Isaac Corporation but more importantly it is your credit score. This is a number based on your credit report. This number is what you are often judged by. It ranges between 300 and 850. Each credit bureau has a number on you. Simply put, the number stands for how likely it is that you pay your bills. The higher your number is, the better. By having a high number it allows you to receive the best rates of interest and a better approval rate on loans etc. This credit scoring system give you points for each detail of credit report history. The positive items give you points. Factors like payment history, the length of your credit history, any new credit received and types along with amount owed help determine it. Your credit score takes all of these into account. No one single factor will determine it and also realize that there are some other factors that can come into play when a creditor is looking at lending to you, such as your current job and its security.

Payment History
-various payment information from your credit card bills, retail store accounts and other loans or mortgages etc.
-Have you had any bankruptcies or liens, also any garnished wages or lawsuits filed against you.
-Do you have overdue payments? How much and how long have they been overdue.

Amounts Owed
-The dollar amount owing on your accounts
-The number of accounts that you owe money on
-How much money you have borrowed from credit lines

New Credit
-The number of new accounts you have opened
-How much you have used your new accounts.

Credit History
-For how long have you had your accounts and if there has been activity on those accounts and what that activity looks like.

Credit Types
-The number or accounts/ types such as retail store or credit card plus loans/mortgages etc.

The following are some examples of what your FICO® score can do for or to you.
If your FICO® is 720-850 you may pay 5% for an interest rate where as 620-674 might have you paying over 7% and a 500 score could have you paying 9%. As you can see it adds up and thus stresses the importance to do all you can to ensure a good score. The majority of people sit somewhere in the 600-800 range, there are only around 1% under 500 and approx 10% over 800. Scores below 600 are considered Bad Credit. Scores between 620-659 are considered Good. 660-719 are Very Good and Above 720 is considered Excellent. Please note that the 3 bureaus will usually vary slightly, and your score will be taken from middle of the 3. If one reports 603, the other is 609 and the final one is 613, the 609 score will be the one used.

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