What is a FICO Score?
FICO stands for Fair Isaac Corporation regarded as the best and most generally used credit report model in the U.S. FICO scores are primarily based on a shopper’s credit info and are what banks and other lending establishments use to base their lending decisions on. If you need a low interest rate on a new loan, a high loan amount and very little collateral or security, then you need a good FICO score.
Payment History
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.
Debt Not Paid
The subsequent biggest chunk to determining your score is total debt. Percentage owed on vehicle 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 have had credit cards open and good standing the better it looks on your record, so dont close your oldest accounts. Fifteen percent of your FICO score is based on your credit history. On a side note, remember to not open more credit card accounts than you really need.
The Type of Credit and How Often Accessed
Numerous credit inquires within a short period of time can have a negative effect on your score. On the flop side, having several types of credit accounts in good standing can increase your score. It helps your credit to have several installment loans such as a car loan and a mortgage open along with a few credit card accounts.
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