Fico Credit Scores - A Simple Guide To Understanding The FICO Credit Scoring System!

Your FICO credit scores are extremely important. In fact, this information has a big impact on your life, whether you realize it or not. A good FICO score can mean you get low interest rates, if you are low on the FICO score chart, you may find yourself with high rates or no available credit.

You'll find that your FICO credit report can affect not only your finances, but your job, and whether you can buy a car or rent a home. Because it has such a big influence on your life, understanding more about the FICO score range and how you can improve FICO score is definitely important.

FICO Credit Scores - Some Basics That You Should Know!

What is the Fico Score

First, you may be wondering what FICO credit scores are in the first place? Basically this score, which stands for Fair Isaac Corporation, is a three digit number that represents your credit.

The FICO score range goes from 300 to 850 and the higher your score is, the better your credit is. Ranking high on the FICO score scale is going to affect whether companies give you credit and it also will have bearing on the interest rates that you are charged. Today you'll find that the average FICO score is about 650.

Three Credit Reporting Agencies

Each of the three credit reporting agencies out there use FICO credit report scores because they are so popular. These three reporting agencies include Experian, TransUnion, and Equifax.

In some cases, you may find that your FICO score chart varies a bit across these three agencies. This occurs because information may be a bit inaccurate or some credit companies may not report at all, while others may report late, causing there to be differences on the score across the three agencies.

What Exactly Is a FICO Credit Score Composed of?

5 Categories that Determine Your Score

When it comes to FICO credit scores, you'll find that there are five different categories that are looked at to determine your score. Here is a look at each of these categories, the percentage they have on the FICO score chart, and more.

Category #1 - Payment History

First, when your FICO credit report scores are being calculated, one of the things that is taken into consideration is your payment history. This actually accounts for 35% of your score, making it the most important of these categories.

This includes payment information, the amount past due on any accounts, accounts you have paid off, any past due items, the time since you have had any delinquent items, and more. Working on your payment history is the best way to improve FICO score, since it accounts for so much of the score in the first place.

Category #2 - Amounts Owed

The amounts owed category takes up 30% of your FICO credit scores. This part of the score includes the amounts that you owe on all accounts, the number of accounts you have with balances on them, proportion of the total limit you are using, installment loans that you still owe on, and it may even consider the lack of certain types of balances.

Category #3 - Credit History Length

This category makes up 15% of your total FICO credit report score. The credit history length category includes the time you have had since your accounts were opened and the time since you have had any activity on the accounts.

Category #4 - New Credit

New credit is a category that makes up 10% of your total score. It takes into account accounts that have been recently opened, the credit inquiries that have been made, time since any inquiries, re-establishing positive credit, and time since you have opened a credit account.

Category #5 - Type of Credit

Last, is the type of credit you are using, which accounts for 10% of the total FICO scores. This can include the different types of accounts that you have, including installment loans, credit cards, mortgages, retail accounts, and more.

Important Facts You Should Know

When it comes to FICO credit scores, there are some very important facts that you need to know. First, you need to know that you are entitled to have a free copy of your credit report each year.

It's a good idea to take a look at the FICO credit report to see if there are any errors that are damaging your score. Any errors should be disputed. Another important fact is that there is no quick way that you can improve FICO score. It will take time to improve your score. Just remember, this score is important and working to have good FICO credit scores can make many aspects of your life easier.

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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.