|
|
FICO Score
a.k.a. "Fair Isaac Score"
or "Credit Score" by Jimmy Smiles What is a FICO Score?
FICO Score, or to give it its full name, Fair Isaac Score or credit score, is a rating or number representing the creditworthiness of a person, or the likelihood that a person will pay his or her debts. As well use of credit and other information about you known as credit reports, FICO Score usually determines key factors such as the rate of interest and terms. These include the down payment, collateral, interest rate, payment terms, and lender terms. The Idea behind FICO Score is that Lenders and Employers want credit decisions to be fairer and faster. Factors like your religion, nationality, gender, race, and marital status are not considered by FICO Score or Fair Isaac Score. So when you are evaluated based on your credit scores, you are getting an evaluation that is based as fair and objective and not on personal opinions or biases. What is a good Fico Score based on Fair Isaac scoring? Since Lenders use different criteria in evaluating your Credit Score its hard to say what a Good Fico Score or a poor Fico Score is. For example, one lender auto lender may offer lower interest rates to people with FICO Scores above 680; another mortgage lender may use 720; or another credit card lender will use 720, and so on. Ask your lender for a given credit report based product. FICO Score Basis Payment History
FICO Score of which 35% is based on Payment History. The reasoning being that the first thing any lender would want to know is if you have med your past obligations. How well have you paid past credit accounts on time? Your payment history is only one fact that is used in calculating your FICO Score. Your FICO Score takes into payments from credit cards including Visa, Mastercard, America Express and Discover. Other loans are included as well, such as, regular payment loans including, car loans and mortgage loans. Public record and collection items included in your credit file such as public record and collection items. Credit report items such as bankruptcies, foreclosures, suits, wage attachments, leins, and judgements all have matterial impact on your FICO Score. Keep in mind that older items count less that more recent items or larger amounts. Bankruptcies will stay on your credit report for seven to ten years. Wether you filed a chapter 7 or chapter 11 bankruptcy will also have a matterial impact on your Fair Isaak Score. The FICO calculation also considers scores based on if payments were 30 days late, 60 days late, or 90 days late. Important to note that FICO also considers the number of accounts you have and all their track records together.
Amounts Owed in your Credit Report
FICO Score is made up of approximately 30% of the amounts a person owes. Having credit accounts in which money is owed does not mean that a person is a high risk borrower with a low FICO Score. When a person, however, has a large percentage of the personal credit available in the accounts are used it does indicate that the person is overextended and likely to make payments late or default. The Fair Isaak Score takes into account how much is exactly too much for a given credit file. Important to note that the total balance on your last credit card statement is the amount that will show in your credit report. So even if you are a responsible person who pays off your entire credit card balance every month, if your balances are high before you pay it off, your FICO Score will be adversely affected. Certain types of accounts are weighed more heavily in your credit score such as credit cards and installment loans. Closing accounts will not increase your credit score, but having a small balance on your credit cards without missing a payment will be better reflected towards your credit score. Having large number of accounts with balances will indicate to Fair Isaak that you will have trouble makeing payments in the future. Paying down your original loan over time will show positively in your FICO Score.
Length of Credit History
FICO Score is approximately 15% determinated by the length of your credit history. The longer the credit history, the better for your FICO Score. FICO Score considers the age of all your accounts. It also keeps into account how long it has been since you used all your accounts.
New Credit
FICO Score is approximately 15% determined if you are taking on more debt recently. FICO Scores rate you down if you open several credit accounts in a very short period of time. This is especially true for people with little credit history. How many new credit accounts you have is reflected poorly in your FICO Score. It also scores how long it has been since you have opened a new credit account. Recent inquieries of certain types are reflected in your score. FICO Scores only take into account inquiries from the last 12 months, however, inquiries are kept in your credit file for 2 years. If you have been late on past payments, but you have recently been making payments on time it will improve your credit score.
Types of Credit
FICO Score is approximately 10% determined by this factor. The Score will consider your mix of the types of credit accounts. Credit cards, retail accounts, installment loans, finance company accounts and mortgage loans will all help FICO Score you. Different types of credit accounts give FICO more information to score you. FICO Scores you based on your ability to make payments on different types of loans, say credit cards and installment loans.
FICO Score Summary FICO Score helps you:- - Get loans faster in an instant.
- Get fairer credit decisions from credit lending companies.
- Improve your score with recent good payment patterns.
- When lenders consider your FICO Score, it is not based on personal opinions.
Your FICO Score is not the only factor in making credit decisions. Lenders look at a number of other factores such as the debt to income ratio and credit history.
|
|
|
