A Fair Isaac Corporation score is what can make or break your credit or loan, or determine what kind of auto insurance you are able to get. This determines whether you are legible or not for your request. This was named after the inventors of the credit risk score, a three digit number in charge of your credit worth or the capacity you have to pay your debts. This score is calculated from information in your credit reports. This gives you an idea that your credit reports are very important, so they should be correct and complete.
For any spender on credit, you should focus on making sure your FICO score passes the requirements of certain firms so you can have your application accepted. This can be done through effective spending habits. But, first, it is important to learn exactly what constitutes your FICO score.
What Makes up your FICO Score?
Generally, a FICO score is between 300 and 850. Higher range scores are greatest for gaining credit and low interest rates. You should take note that Experian, Equifax, and TransUnion – the three credit rating agencies – operate quite distinctly in calculating your FICO score. In that effect, you actually have three scores instead of just one. These scores differ because credit report information varies between credit reporting agencies.
These are the elements of your FICO score, so you know how they are calculated:
- Payment History – 35% (Frequency of paying bills on time)
- Credit Utilization – 30% (How much you use credit, compared against debt)
- Credit History – 15% (time when you acquired your credit or loan)
- Credit Types – 10% (various credits you have such as mortgage)
- Credit Inquiries – 10% (how often lenders check out your credit )
FICO Scores and How to Change Them
Your scores can change depending on how you spend. Late payments can lower your FICO score, for example. The opposite will give you a higher FICO score, and as a result, better interest rates and credit. Every time you request your FICO store, always take note of the positive and negative areas in your report so you can compare them each year.
Other factors that affect your FICO score include:
- Increased credit card balances
- Closing credit card accounts
- Repossessions or foreclosures
- Reduced credit limits
- Opened new credit accounts
- Collections, tax liens, or debt-related judgments made against you
When your FICO score drops even though you’ve done nothing to change it negatively, you need to check your credit reports for any errors that arise. Using a credit repair service can definitely help you out if you want to find out what went wrong over that certain span of time. Make sure you do this the moment you find out your FICO score is affected, because, if you don’t, you might suffer the consequences.
Keep your FICO score in top shape to get the best benefits you deserve for your credit application. Make sure to spend wisely as it can affect how your FICO score develops.