FICO CREDIT SCORES

FICO credit scores are used to assess potential customers and decide on amounts of loans and interest rates. A good credit score can save a lot of valuable money by attracting a lower interest rate.

More than 75% of the applications for credit in the U.S. last year were decided with the help of a FICO score.

FICO CREDIT SCORES: WHAT THEY ARE

The credit scores are supplied with credit reports for an extra charge and are generic scores calculated by the three credit bureaus with their own separate algorithms. FICO is an acronym formed from the name of the person who first calculated them. There are also custom scores that private companies or lenders generate of their own based on the credit report and other information they hold.

USES OF CREDIT SCORES

A credit score is like a grade or the marking system used to evaluate examinees. It gives us an immediate picture of where a customer stands – a 9 out of 10 is an excellent candidate. A 3 or 4 reflect poor performance in the past. An above 6 means a generally good performance.

The credit scores are similar marking schemes that tell lenders and companies how good a borrower you are of their money.

Credit scores make it easy to take quick decisions without having to pour over the details. The scores are supposed to be objective, and take only financial information into account. Personal factors like age, gender, race, locality, etc. are eliminated with the scoring system.

Credit scores are utilized by credit card companies, home and car mortgage services to assess customers and fix interest rates and loan amounts. A very poor score may result in denial of service, in which case you can ask them for a free copy of the credit report and take suitable measures to improve the score.

GENERATING FICO CREDIT SCORES

Score factors are those used to calculate credit scores. These could be the debt amount pending, types of accounts, number of late payments, and age of accounts.

If you want to improve credit scores, the score factors come into picture. These are the elements that must be worked upon to bring about an improvement.

Apart from the standard FICO score, there are other risk scores. Score factors are consistently use to calculate any score. If you have been declined credit, the lender must provide you with the scores used to deny the service.

READING CREDIT SCORES

Credit scores range from 300 to 850. A score of 600 plus is considered good. The majority falls under this category. There are no hard and fast rules to determine what the score must be to be considered acceptable. Every lender evaluates the score based on their perception.

IMPROVING CREDIT SCORES

Consult a professional guide if you wish to improve upon the score. There may not be a short cut way. Repaying debts, making regular payments, using less credit, getting old, negative statements removed from the report are some of the ways to start improving the score.