Fair Isaac Corporation Credit or FICO Score

As I am not from the US, I had no idea what FICO meant before researching it. FICO stands for Fair Isaac Corporation, a company based in California. FICO, put simply, is a person's credit score. A credit score can be used by a potential lender in making a judgement on whether to grant you credit or not, for example when you apply for a new credit card or home mortgage. Therefore, if you are in the US, the FICO score is very important to you.What Does a FICO Score Do?

A FICO score places a value on the types of credit accounts you hold or have held, and your credit history in maintaining those accounts. The FICO score scale ranges from 300 to 850, with the majority of people in the United States in the 600 - 850 range.

Factors Which Affect Your FICO Credit Score

There are 5 factors in all which determine your FICO credit score:

1. Your payment history.

This counts for a very significant 35%--the most of the FICO score factors. As you would expect, paying your bills on time is gets you a good score, while paying them late on a consistent basis is will mark down your FICO score. If you have had debts referred to a collection agency, that is worse still, while declaring bankruptcy is the worst of all.

2. How much you owe.

Another obvious factor that FICO will take into account in arriving at a credit score. This accounts for another 30% of your total FICO score. It is not just what you owe already that affects your FICO score. Also taken into account is the amount of credit available to you. For example, if you have a credit line of $5000, but have so far only used $1000, that will be taken into account.

Your total amount of credit will be totalled, and compared to your annual income. So, loans such as car loans, mortgages, credit cards, store cards, will all be added together. Those who use most or all of their available credit will get a lower rating for this part of the FICO score calculation.

3. Length of credit history.

Another important factor that makes up 15% of your FICO credit score is the length of your credit history. The longer your credit history, the better for your FICO score. Additionally, though, a long history with any particular lender will be good for your credit score.

4. Type of credit mix.

The fourth factor taken into consideration is the type of credit mix that you have. For example, do you have only high risk unsecured type credit, or do you also have some solid secured loans such as a home mortgags? Those consumers who have a mix of credit have higher a FICO score. This fourth factor just counts for 10% of the total FICO score.

5. Number of new credit applications.

The last factor in the FICO rating is the amount of new applications that you fill out. If you have recently filled out a lot of credit applications, this will hurt your score because it puts lenders "on alert" that something may be wrong. This part of the score is worth 10%.

Lenders themselves will normally look at employment, income, length at current residence, and marital status, but these do not affect your FICO score. If you intend to borrow in the future, you do need to pay attention to your FICO score. If your FICO score is low, this could lead to higher interest rates, extra mortgage insurance when buying a home, and in some cases denial of the loan.

If you plan to take out a major loan, such as a home mortgage, it could be a wise move to get a copy of your credit report 6 months before you plan to apply. That will give you time to look over your history, to ensure there are no discrepancies. If you find inaccuracies, contact the Credit Reporting Agency in writing. They will have 30 days to investigate it, and then correct it if they find your claims are true. You may also want to ask for a revised credit report; they are required by law to supply you with one if an inaccuracy is found and corrected.

This article about FICO was written by Roy Thomsitt, owner of the Eliminate Credit Card Debt Now website.

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Credit Information:

Related Articles

Have You Ever Opened a Checking Account?
Maybe some of you are saving it in your trusty piggy bank, under your mattress or way back in a sock drawer. Although I'm glad that you are saving, your money is not doing anything for you locked up in your house.
Useful Tips On Avoiding Credit and Charge Card Fraud
Credit and charge card fraud costs cardholders and issuers hundreds of millions of dollars each year. While theft is the most obvious form of fraud, it can occur in other ways.
Commercial Collections: Business Finance Booster Shot
Commercial collections: fixture of the new B2B cultureIf you're in the business-to-business field, or even if you're a consumer products business that works through third-party distribution channels, you probably know what it's like to check your mail anxiously each day, sifting through all the bills for that payment that was supposed to have been in months ago.It wasn't supposed to be like this.
Credit Cards For People With Bad Credit Scores
Sometimes life lands you in a situation that causes your credit to suffer. A job loss or illness can send your credit rating south leaving you with nothing to do about it.
Identity Theft Exploding: Here's How You Can Avoid Becoming A Victim
Americans are more concerned about identity theft than unemployment or corporate fraud, according to a survey of 2,000 people conducted by Star Systems.Nine out of ten Americans demand new federal legislation, while two-thirds say the financial services industry needs to do a better job of verifying the identity of customers who open bank accounts (66 percent) and credit card accounts (72 percent).
Credit Cards: Pros and Cons
Sure, there are a lot of problems with credit cards, but there are a lot of good things attached to them as well. For instance, if you have a small business, fleet credit cards can keep your books in order when you issue them to drivers of company vehicles for gas and automobile repairs.
I've Heard About FACTA; What Does It mean?
What FACTA means is that if you, as an individual, lose the information on anyone you have ever hired; or, for any business in the United States of America that collects any personal information on people, if the information should be lost due to not destroying the information properly, then two things can happen. First, there are federal fines of up to $2,500.
New Law Provides Free Annual Credit Report
As of Thursday, December 1, 2004, one-third of Americans will be able to access their credit reports from all three main agencies for free. Passed in late 2003, the Fair & Accurate Credit Transactions Act creates a central source consumers can use to obtain a free annual credit report.
Is Your Credit Score Costing You Money?
Most of us want a good credit report to obtain automobile financing, credit cards, and to purchase a home. But, beyond these consumer loans, your credit report can cost you in everyday living expenses.
Figuring Out the Ever Nebulous Numbers Called Credit Scores
Credit Score FactorsThe information contained on our credit reports affect every aspect of our lives; including employment, insurance, and even interest rates (mortgage, credit cards, automobiles, etc.).
Taking Control of Your Credit History
Your credit history is important; in fact, in this day and age, only family and your time are more important than your credit history! The first time you established a payment commitment over a period of time for a purchase, you began your history of credit, and the credit bureau created your account. Payments such as the electric company, a rental agreement, a cell phone, a car payment or a low-rate credit card which you also have a responsibility to repay are not reported to the credit bureaus as a part of your credit history.
Looking for that Low interest Credit Card?
If you have been shopping around for a Low Interest Credit Card you will notice that the UK market is awash with Credit Card companies offering low rates to entice you to apply for their Cards.There has never been a better time to consolidate your credit cards and get a far better interest rate.
What Are the Most Common Ways to Commit Identity Theft or Fraud?
It's the number one source of consumer complaints at the Federal Trade Commission (FTC), and unfortunately, it's one of the simplest crimes to commit. Identity theft involves information from your daily life, from shopping, bill-paying, and even applying for a job.
Can Credit Search Entries Affect Your Ability to get Approved for a New Loan in the UK?
About Search Entries:Every time a lender checks your credit history from your credit file (i.e.
Check Your Credit Before Shopping For That Home Loan
Review Your Credit Score.Nearly every bank, credit union, and mortgage lender relies on a three digit score provided by one of the three major credit bureaus to help them make lending decisions.
Credit Cards: What is the Universal Default Clause?
Most people who carry major credit cards are well aware that the interest rates associated with them tend to be higher than for other types of lending, such as home or auto loans. Anyone who has paid their credit card bill late more than once or twice is also aware that doing so may cause the interest rate on their card to go up - sometimes by quite a lot.
Building A Credit Report Lenders Will Love You For
Will lenders really love you for having a good credit report score? Love is not the right word of course; lenders are after your money, and never forget that. But the lender's representative will love dealing with your credit application if your credit report is good.
Beware of Falling Minimum Payments
If you opened a credit card statement recently and were pleasantly surprised to find that your minimum payment due was lowered, don't be so quick to "jump for joy". What may appear as a small boost to your monthly budget is actually the rock that can weigh you down in debt for a lifetime.
Trying to Land a Job? Poor Credit Scores May Hurt Your Chances
Many employers are now looking at an applicant's credit report for hiring purposes. During an interview process a potential employer may request your written consent to access your credit report.
Dont Trade Your Future for Todays DooDads
"Easy Low Down Monthly Payment," "Buy Now Pay Later," "You Deserve the Car Today and We Can Finance It for You," & "Spend Today, 0% APR until Next Year!" We see those statements above every where today, on TV commercials, car dealership, banks and magazines. Those statements have put a lot of people into a financial disaster, because the statements make a lot of people believe that acquiring bad debts is an ok thing to do.