What Is A FICO Score? - Debt-Relief

What Is A FICO Score?

Your FICO score or credit score as it's commonly called is a very
important calculation that can control whether or not you are eligible to
receive credit and if eligible the terms you can receive credit under.
Failure to understand the impact this score can have on you future
purchasing power and lifestyle can be disastrous. This article will break
down all the information you need to know regarding your FICO score.

As I mentioned above the FICO score is a numerical score that is based on
your financial history as collected in your credit report. Creditors can
use this number to evaluate whether or not you are able to pay a loan back
on time. The higher the score the more likely you are to pay off a loan on
time and the less of a credit risk you pose.

The FICO or credit score ranges are broken down as follows:

720-850 - This represent the best score range

700-719 - Able to obtain favorable financing terms

675-699- This is still a decent score range

620-674 - May have trouble obtaining favorable credit terms

560-619 - May have trouble obtaining credit

500-559 - Time to improve your score

Your credit score is broken down into 5 distinct categories each with
their own importance based on a percentile. The 5 categories and the
percentage they represent I relation to your credit score are as follows:

Payment History - 35%

Amounts Owed - 30%

Length of Credit History - 15%

New Credit - 10%

Types of Credit Used - 10%

Your payment history contains information on credit cards, retail
accounts, installment loans, finance company accounts and any mortgages
you may have had. It also details any past due accounts and the amount
owed on hem. You will also find bankruptcy information as well as other
adverse information in regards to your credit history. This is why it
warrants a 35% piece of the pie.

Your amount owed is generally speaking the amount owed on any accounts you
currently have and number of accounts with balances. Note that it has a
large impact (30%) on your credit score. The length of your credit history
details when accounts were opened and the last activity on those accounts.
New credit shows the number of recently opened accounts by the type of
account and number of account inquiries. Finally the type of credit used
is a snapshot of what types of financing you have held.

Other information that is included in your credit report but has no
bearing on your FICO score includes your race, age, where you live and
your sex and employment information. Although the FICO score doesn't use
these factors the employment information may be used by other companies
and creditors to help in their decision making process.

There are three major credit-reporting agencies - Equifax, Experian and
TransUnion that have your credit information on hand. Each of these credit
bureaus maintains their information separately, which can cause the
financial data to be slightly different among the three of them. Most
experts agree that in order to get the best snapshot of your financial
history and credit worthiness it is a good idea to request a report from
each of the reporting agencies. It is also highly recommended that you
actually review your credit report once a year in order to identify and
correct any errors before they cause any future potential problems when
you apply for credit. Recent changes in the laws no allow for consumers to
request 1 free credit report each year in order to look for any such
errors.

Here is the contact information for each of the three reporting credit
bureaus:

Equifax: (800) 685-1111, www.equifax.com
Experian: (888) 397-3742, www.experian.com
TransUnion: (800) 888-4213, www.transunion.com

As you can see your FICO Score is a very important number that represents
your financial trustworthiness in the eyes of creditors. Failure to
properly monitor it could cause you future headaches when it comes time to
apply for any form of credit.

Timothy Gorman is a successful Webmaster and publisher of
Debt-Relief-Solutions.com. He provides more debt relief, consolidation and
credit repair information that you can research in your pajamas on his
website.

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