[W]hen we think about credit reports and scores, we tend to think of the three major credit bureaus Equifax, Experian, and TransUnion. All three of these companies do collect information about your past and present credit accounts and do issue credit scores upon request. However, if you want to get a major financial deal such as a home mortgage loan then you need to know more about Fair Isaac Corporation. The company created and manages the FICO credit score range that so many people hear about these days.
FICO provides a score based on information from all available credit reports, which some lenders really want to know. For example, some people might have a clean TransUnion report but a litany of credit problems reported on Equifax. Representatives can issue anywhere from 300 to 850 when using a FICO credit score range.
Credit scoring formulas are pretty similar whether your potential lender is using Equifax, Experian, TransUnion, or requesting Fair Isaac’s assistance. The lower your score, the more of a credit risk you present to your prospective lender. The higher the credit score, the better financial risk you pose. Hence, you will be much more likely to receive a loan and get favorable interest rates with a FICO score of 700 or higher.
The Fair Isaac credit scoring formula assigns value to several aspects of your financial history. Thirty-five percent, or about one-third, of your FICO score is directly related to the timeliness of your payments. If you pay bills late or not at all, your credit rating plummets. If you consistently pay your bills on time, you are on the way to having a top tier FICO rating.
Thirty percent, also about one-third, of your Fair Isaac rating depends on your utilization of existing credit accounts. If you have $10,000 of available credit card limits and owe $5,000 or more on your accounts, then your credit utilization is high and decreases your score. Keep all balances to 50 percent or less of your available credit limits; about one-third utilization is even better.
Fifteen percent of your FICO rating can be attributed to the length of your credit history; the longer you have successfully used credit the better off you are financially. Ten percent of your score is determined by whether you have a diverse range of accounts. Lenders want to see you responsibly using credit cards, secured loans, and unsecured loans.
The final 10 percent of your Fair Isaac score is determined by how many recent credit applications you have completed. If you have applied for a lot of credit recently, you look financially desperate and your FICO rating will plummet. Fortunately, the score damage ends after about six to 12 months and the record of your credit applications only remains for two years.
[I]f you made a resolution this year to pay off debt and improve your credit, you may find you have a challenge. For some, getting a second job is the best way to accomplish this goal because it provides extra income. If this isn’t an option, you can focus instead of saving money to give […]
[I]f you have bought a home recently, are in the process or plan to in the future, one of the options you may have is to purchase a home warranty. However, you will have to decide if having a warranty is worth the initial cost. What is a Home Warranty? A home warranty covers your […]
[F]or many, health insurance is a cost they can’t afford. Premiums have gone up and co-pays are often higher as well as deductibles. If you have decided that you just can’t have health insurance, be aware of what it may really cost you. Major Health Issues As long as you are healthy, not having health […]
[I]f you already work a second job or have kids and no option to take on part-time work, you may wonder how you will ever be able to pay off debt and improve your credit rating. Fortunately, there are ways you can earn money even when you don’t have time to fit in another job. […]
[T]he My Friend Cayla is a doll that has been making the news in a bad way. In fact, some advocate that parents get rid of the doll that has been banned in Germany. This interactive toy connects to the internet to talk with your child, answer questions and just be a lot more fun […]
[D]ebt is something most people have but very few want. Credit card debt and medical bills are especially detrimental to a person’s life and credit rating. For many, they take on a second job and devote the income to paying off debt. However, if this isn’t an option for you, there are still ways you […]
[M]ost people who spend too much know it. They run into the store for paper towels or a gallon of milk and come back with two or three bags of stuff. Every time they sit down to pay the bills and see they don’t have enough money to cover expenses, they promise never to splurge […]