FICO score is an indispensable number that help any users to digest credit report information, easily and quickly.
Your FICO credit score shows you a snapshot of your credit history. Your score tells any readers how good you’re in paying back the money you borrowed.
A high FICO score means your debt level is manageable and you pay all your accounts right on time. To have a good credit score and keep that score in a good level you have to stay in debt.
This “stay in debt for as long as you can” is a situation where Dave Ramsey called it ridiculous. But we live in the credit economy. If you have to depend on credit for major purchases that is the name of the game.
Now, do you want to qualify for any kind of financing? Let’s learn about the FICO credit scoring and how lenders and creditors use it to approve or reject your application as well as calculate the interest rate.
How Your FICO Score Works
FICO credit score is the most popular scoring method for determining a person’s creditworthiness. The FICO scoring formula is invented by Fair Isaac Corporation, a California-based company.
The score calculation use a complicated algorithm, based upon a variety of factors. These include how much credit you have available, how much you owe, what your payment history has been like, the length of your credit relationships, and any charge-offs or bankruptcies which appear on your account.
Recent inquiries on your credit, and if you have recently opened a credit account, can affect your credit score. The info is compared against every other American who has a credit history of any form, and everyone gets a credit rating. This score tells lenders how likely you are to pay back a loan.
Your FICO score ranges from 300 to 850 and most people’s scores land between 600 and 850.
Credit scores affect us when we try to get a mortgage and in any area where we might end up owing someone money. For this reason, having a good credit score is a serious issue. If you suffer from low credit scores just take steps to improve them by intervening the above factors.
How and When to Get Your FICO Score
Before applying for a debt consolidation loan consider getting your score from one of the three major credit bureaus: Equifax, Experian, and TransUnion. Equifax, being the biggest of the three, may be a reporting agency where you want to start.
By law each bureau is required to give you a free copy of your credit report each year. The three major bureaus are similar in what they record, so to protect yourself from identity theft try pulling a report from one of the three companies once every four months.
Make sure your reports are free of error or inaccuracy. And don’t order your credit scores before you successfully dispute all errors found with the reporting agency. Once you find out that the report is correct you can then order your FICO credit score report.
If possible, try to get your credit score long before you apply for a loan. This will give you some ideas of what interest rate to expect, as well as give you an opportunity to dispute any errors on your report.
Ideally, you will need at least six months for credit repair to improve your FICO credit score.