What’s A FICO Credit Score?
May 26, 2008 · Print This Article
You have probably heard the word “FICO” before in your financial dealings. Do you know exactly what FICO stands for? FICO stands for the Fair Isaac Corporation. These people who retrieve information from your credit report to calculate the three digit number which is your FICO score have been at this task since the late 1950s.
They have special software which uses special math tables that manipulate the numbers found on your credit report to figure out your score, and they do this for all three of the credit reporting agencies. Each agency can have different credit information on you, which is why the scores from the different agencies can be different.
Here is the formula used by the Fair Isaac Corporation in figuring your credit score. Your payment history is 35% of the score. Paying your accounts on time will get you a high score. Paying late or not at all, as in bankruptcy, will make your FICO score low.
The amount of money you owe is 30 percent of your credit score. They look not only at how much your owe on your credit accounts, but how many of your accounts actually have balances, and how much of any available credit you might have is being used.
The length of time you have had a credit history is 15% of your score. The longer you have had credit, the better your score will be. Note that it is still possible to have a high score even with a short credit history. It’s all about how your credit history looks to FICO’s computers.
If you have recently gotten any new credit accounts, they add 10% of your score, and the type accounts these are makes up 10%. Too many credit applications that are too close together – any more than around 30 days – can lower your credit score.
FICO likes to see a wide variety of different types of accounts. This makes up 10% of your score. Credit cards, a home loan, and personal loans can all add to your score.
All of this information is used together to determine your credit score. No one thing has more bearing on the score than another, but the different “sets” of information can mean more to one person’s score than to another person’s, simply because of differences in their credit histories. A low FICO score might get you credit, but you will pay thousands more in interest fees than someone with a good FICO score would.
Unlike your credit record, you usually have to pay a small fee to get your credit score. You must also prove your identity in order to get your score to prevent identity theft. You can get your credit score online, on the Internet, via telephone, or in the mail.
Recent additions:
- Credit Repair After Foreclosure
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- Consumer Credit Counseling
- A Beginner’s Guide to Credit Scores
- Contacting The Credit Bureaus
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[...] be honest, if your credit score is beneath 650, you may have some real difficulty trying to get a loan or a credit card with terms that are [...]
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Twenty Five Reasons for Lower Credit Scores. 1) Amount owed on accounts is too high – What this refers to is … your own credit report and score, in order to check it (Consumer …
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How to get a Great Credit Score with Equifax or Trans Union
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I hate how all the news now is noting that blacks and hispanics are getting denies for loans because of their race. they are not considering the poor financial planning of these groups nor the low amount of credit due to few revolving lines. btw, i’m hispanic and my credit score is 760+
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Sorry to say, you can't these inquiries were real and nothing but 2-years time will remove them.
I work in finance for a car dealer and 6-inquiries I agree is to many. It shows that the person doing the submitting did not know what they were doing.
But, the reality is there is nothing you can do about it now.
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Unless you were more than 30 days late your score did not drop at all. This is because your first negative mark is at the 30 day mark. If they reported you 30 days late and you were not you can dispute it and have it removed.
Now, if you were more than 30 days late and it is reported. Then depending on the rest of your credit it could drop anywhere from about 10-50 points total for the 2 accounts. If you have a long and positive history with a lot of accounts you will probably be closer to the 10 points, if you have a shorter history with only a few accounts you will probably be closer to the 50.
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I can't tell you exactly how long it will take, but I can certainly share with you how the system works, so you'll make more informed decisions.
Your credit score is determined by the following:
35%: Bill-paying history. Mostly everyone knows how important it is to pay your bills on time. And that's because that's the factor that can the most impact your credit score. It's also worth noting that it's more a question of pattern. What that means is that one 60-day late payment will have less of an impact that a string of 30-day late payments
30%: Debt usage ratio. That is the amount of debt you have outstanding compared to your total credit limit. A generally accepted rule of thumb is that this ratio should be kept under 25% for best results. Between 25 and 50% isn't too good for you, but the impact is fairly manageable. Going over 50% should definitely be avoided
15%: Length of credit history. The longer your history, the better. It allows any potential lender to have a more accurate picture of you.
10%: Mix Of Credit. Showing the ability to successfully manage different types of credit has a posotive impact on your score (revolving credit, consumer finance, installment loans, and so on)
10%: Pursuit of new credit. Having many recent inquiries on your credit report is interpreted by lenders as a sign that you're financially strapped. The good news is that since shopping around for a loan is the smart thing to do, credit score calculations have been altered so that all inquiries of the same type, made within a reasonable time frame (15-30 days, depending on the type of loan in question), count as one single inquiry.
The credit score calculation formula gives more "weight" to new information, making it easier to offset previous negative information with a couple years' worth of good behavior. Of course, it also works the other way and one bad year will greatly damage an otherwise perfect picture
Because of the "debt usage ratio" and "length of credit history" factors, it's unwise to close credit accounts even if you've paid them off. Doing so reduces your credit limit, so any ratio you had will automatically become higher. And it's also like you're deleting credit history because that information is no longer accessible to lenders. In short, the longer you've had the card, the bigger the limit, and the better you've managed it, the more you stand to lose by cancelling it.
One of the fastest ways to build (or rebuild) credit is to go to a local bank and purchase a CD, then use it as a collateral on a 6- or 12-month loan. The interest rate will be very low, and the payments will help your credit history in several areas, namely bill-paying history and mix of credit.
When you ask for an increase in your credit limit, your lender performs what's called a periodic review. Which is actually an inquiry with the credit reporting agency. These inquiries created as a result of the periodic reviews are not supposed to be factored into your credit score. More information here:
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Any one of the big three can give you your credit score.
Experian, TransUnion, and Equifax will all give you a free copy of your credit report.
The best way to get your credit score up is pay all of your bills on time, all the time, and consistently. There is no instantaneous fix, and it will take time.
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Your best bet is to call some banks, each bank has different lending standards. This site is a good resource for finding the best rates, , they have a list of rate tables by zip code.
Ask lenders for agreement to delete this items from your credit report when paying them. I recommend to get such agreement thru credit repair agency, for example this one – buildcredit.ifastnet.com
5 New Rules For Getting The Proper Mortgage: 1. The Better Your Credit score Score, the Lower Your Curiosity Rate …
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