What is FICO?
FICO stands for Fair Isaac Corporation, known as the best and most widely used credit score model in the U.S. FICO scores are based on a customers credit information and are what banks and other lending institutions use to base their lending decisions on. If you want a low interest rate on a new loan, a high loan dollar amount and little or no collateral or security requirements, then you want a good FICO score.
History of Payments
The biggest part of your FICO score (35%) relies on your payment history so if you pay your debts on time you’ll have a better credit score. Late payments can adversely have effects on your score, and delinquent payments and collections have a major negative result on your score. Delinquency and collections stay on record for 7 years, and think twice before filing for bankruptcy it’ll complete devastate your score.
Outstanding Debt
The next largest chunk to determining your score is total debt. Percentage owed on car loans and mortgages and the quantity of credit cards maxed out can lower your score. For credit cards, the guideline is to keep your card balances at 25% or less of their maximum.
Credit History
The longer you’ve had credit cards open and good standing the better it looks on your record, so don’t close your oldest accounts. 15% of your FICO score relies on your credit score. On a side note, don’t forget to not open more credit card accounts than you actually need.
Credit Inquiries and Types of Credit
Several credit inquires within a short period can have a damaging effect on your score. On the other hand, having many varieties of credit accounts in good standing can increase your score. It helps your credit to have plenty of installment loans like an auto loans and a mortgage open with some credit card accounts all paid on time each month.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
Tags: Credit, credit score, debt, fico, fico score, Loans, Personal Finance