What You Need To Know About Your FICO Score

Whether you realize it or not, a FICO score is important to anyone who wants to borrow money. If you're buying a house, a car asking for a line of credit, or even trying to get insurance, the lender will check your credit information and especially your FICO score. So what is this score?

Fair Isaacs and Company created FICO and it's a numerical indicator showing how good your credit rating is. A score of 300 is the lowest and shows a poor credit rating, while a score of 850 is the highest and points to an excellent credit. The score does not just control if you will get the loan, but also how high your interest rate will be set. The higher the score, the more a lender is apt to believe they will get their money paid back and on time.

This number, a 600 credit score, for example, is determined by five factors: payment history, amount of money currently owed, how long you have had credit, amount of new credit issued and types of credit. The payment history gets the highest weighting, with the new credit and types of credit getting the lowest weighting. This means that if you have a good payment history, but only credit card debt, the fact that you don't have a good mix of debt will hurt you less than the good payment history will help.

For these reasons, it is important to keep track of your credit records at all three agencies to verify accurate information. Should you see errors, they need to be corrected right away by calling the credit bureau agency. In addition, don't fall for scams that promise to fix your FICO score or credit information immediately by paying a fee. The only thing that fixes a lower FICO score is time, making sure you pay your bills on time and not take out new debts until you start getting some good feedback on your credit history.

Each of the three major bureaus, Experian, Trans-Union and Equifax have different calculations to come up with your credit score. Although they should be similar, it is not unusual to see three different sets of numbers. Add to it the calculation can change based on what credit you need - mortgage, automobile loans or revolving credit and you're looking at 9 different sets of numbers! Although lenders used to hide the score used from consumers, when you seek a credit check on yourself, you can also ask to receive your current score.

A federal department monitors the scoring system to ensure fairness. This means lenders cannot use nonfinancial qualities such as race, gender, religion, and, address to calculate a score.

In addition, it is not a good idea to have no debt! No debt means the companies have no history on your debt payment or how you handle your finances. Keeping some lines of credit open, even if paid off at the end of the month, doesn't hurt to build up that good credit history that is so essential to a higher FICO score.

Fico Score >> Ficoscorepartners >> Privacy Policy >> Disclaimer >> Terms Of Use >> About Us >> Contact Us