FICO Credit Score
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A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time. Each credit score is based on the information in your credit report.
So Why Does Your FICO Credit Score Really Matter?
Credit scores affect whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. For most kinds of credit scores, higher scores mean you are more likely to be approved and pay a lower interest rate on new credit.
What is a good fico credit score?
When lenders talk about your score, they usually mean the FICO score developed by Fair Isaac Corporation. It is today’s most commonly used scoring system. FICO scores range from 300 to 850, and most people score in the 600s and 700s (higher FICO scores are better).
Lenders buy your FICO credit score from three national credit reporting agencies (also called credit bureaus): Equifax, Experian and TransUnion.
In the eyes of most lenders, scores above 700 are very good and a sign of good financial health. FICO scores below 600 indicate high risk to lenders and could lead lenders to charge you much higher rates or turn down your credit application.
The following categories drive your score:
- Your payment history performance (35%)
- Your current level of indebtedness (30%)
- The age of your credit history (15%)
- Your pursuit of new credit (10%)
- The type of accounts in your credit report (10%)
Want to rent an apartment? Without good scores, your apartment application may be turned down by the landlord. Your scores also may determine how big a deposit you will have to pay for telephone, electricity or natural gas service.
Lenders look at your scores all the time. They look at your scores when deciding, for example, whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates. That’s why they are a vital part of your financial health.
You may have more than one FICO Score.
There are many types of credit scores. They are developed by independent companies, credit reporting agencies, and even some lenders. As a rule, the higher the score, the better.
Each credit reporting agency calculates your score and each fico credit score may be different because the credit history each agency has about you may be different. Lenders may make a credit card or auto loan decision based on a single agency’s score, although others such as mortgage lenders often will look at all three scores.
Your fico credit score changes when your information changes at that credit reporting agency. This is good news! It means you can improve a poor score over time by improving how you handle credit.
Many insurance companies use something similar when setting your insurance rates, called a credit-based insurance score. You may be able to improve your insurance score by improving how you handle credit, which in turn may lower your premium payments on auto or homeowners insurance.
Some fico scores offered to consumers are just estimates and are different from the credit risk scores lenders actually use, although they may appear similar. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk.
How might you tell whether a score is estimated? Ask the company if the score is used by most lenders. If it isn't, it is likely to be an estimated fico credit score.
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You can follow the same proven tips and techniques used by credit repair specialist to build the credit rating you deserve!
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