What is a FICO score?
A numerical FICO score is assigned to your debt obligations based on how you repay. FICO scores can range from 300-850. A Higher FICO score means a lender is more than likely to approve your loan application, because you have demonstrated responsible and on-time repayment habits for your debts. An average FICO score is 678.
Developed by Fair Issac & Co., a FICO is a credit score that is used to determine the likelihood that credit users will pay their bills. This credit score is expressed as a single number with the higher the number, the better the score. Three nationwide credit bureaus–Experian, Trans Union and Equifax – calculate consumer FICO scores. Your credit scores are determined by these bureaus after they analyze your credit history and consider such factors as: – The amount of time credit has been established – The amount of credit available versus the amount of credit used – Length of time at present residence – Employment history – Late payments – Negative credit information such as bankruptcies, charge-offs, or referrals to collection agencies Some lenders look at your score from only one bureau, others look at all and pick the middle of the credit bureau scores.
A FICO score is a way of measuring an individual’s creditworthiness without requiring access to their income history or employment status. Originally developed by the Fair Isaac Corporation, the FICO score is now widely used by major credit reporting agencies. Credit card providers and banks will use a customer’s FICO score to determine credit limits and interest rates. Before a FICO score can be calculated, at least one credit account must be open and active for a minimum of six months. While this provides the bare minimum of information for calculating a FICO score, lenders prefer to see a minimum of three or four credit accounts stretching back at least 12 months. This is especially true for banks providing large lines of credit and mortgages. The standard method for calculating a FICO score involves a number of weighted factors: • 35% Punctuality • 30% Ratio of debt being used to total available credit • 15% Length of payment history • 10% Ratio of installment to revolving debt • 1
A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable. Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from differ
Fair Isaac Corp. developed the most commonly used score, called the FICO score. Your credit score is a figure — usually between 300 and 850 — that reflects your credit history. To determine your score, the FICO system uses your credit history in five major areas: payment history, amount owed, length of credit history, new credit and types of credit in use. Scores in the 300s are the least favorable. Even if you score in the 400s and 500s, you may be charged a higher interest rate and will need a larger down payment than someone with a higher credit score. Most people score in the 600s and 700s. If you’re planning to make a large purchase on credit, check your credit score six to 12 months in advance so you can take steps to raise your score. Items that can hurt your credit report: * Filing for bankruptcy. * Too many credit cards. * Too many applications for credit. * Late payments. * Increasing credit card balances. * Several credit cards with balances close to their limits.
