| Your Credit
Score is used by anyone loaning you money. Credit card
companies, home equity lenders, auto loan lenders and
finance companies all use a model created by Fair, Isaac
and Co, the San Rafael, California company that pioneered
credit scoring 40 years ago and dominates the field today.
This score is most often known as FICO and serves as a
snapshot of your credit history. A
low score can raise the price of your loan and a very
low score can mean denial of your loan completely. Here
are the approximate percentages that determine your
FICO Score.
- Payment history (35%).
The largest factor determined on your
FICO score is your basic payment history. The number
of unpaid bills you have, any bills sent to collection,
bankruptcies etc... The more recent the problem, the
lower your score.
- Outstanding Debt (30%).
Are your cards maxed out? High balances
or more precisely, balances that are close to your
credit limit can negatively effect your score. Keep
your balances below 30%.
- Length of your credit history
(15%). How long have your accounts
been open? The longer, the better.
- Recent inquiries (10%).
Every time you apply for credit of
any kind, you create an inquiry on your credit report.
Lots of Inquiries negatively effect your score.
- Types of credit in use (10%).
Current loans from finance companies.
How many and how much.
Your score will range between 300
and 870. The higher the better. As your score increases,
your credit risk decreases. Exact numbers differ
by lending institution but the average high approval
score is 680 or above. Often times your score is taken
from all three credit reporting companies and
the middle score or average score is used.
Depending on the lending institution,
your score can cost you. Some lenders will charge a
higher interest rate if your score is below 600
When you apply for credit your score
does not come directly from FICO. Instead each bureau
has its own version of the rating system with its own
name.
Equifax is called Beacon
Trans Union is Empirica
Experian is Experian/Fair Issac
A credit score of 680 or above can
save you money, especially for home loans. If you are
considering a significant loan you will want to be sure
to check your credit reports first. If negative items
appear on your report you have two choices. Live with
it for 7 to 10 years or dispute these items. For more
information on repairing bad credit Click
Here. |
