The FICO Score is inquired upon by almost all in the lending industry. Lenders check your FICO score when you apply for mortgages, auto loans, renting, etc. The lenders use the FICO Score to assess, “how capable are you to pay off your credit?”
What is FICO Score?
The FICO Score is a scoring method developed by Fair Isaac And Corp, which determines the credit worthiness of the said credit user. It is a computer model established to aid the three major credit bureaus, namely, Equifax, Experian and Trans Union.
How does it work?
The computer model compares your credit history in terms of the status and number of credit cards, balances owed, mortgage, installment loans, late payments, delinquencies and bankruptcies. It calculates your score depending upon your current credit status, and takes into consideration your past credit history. The break up of the calculation can be as follows – Past payment history 35 per cent, outstanding debt 30 percent, length of credit 15 percent, new credit 10 percent and type of credit 10 percent.
It collects data on the credit available to you; credit used by you and the timely repayment on your part and compares it with the other thousands of customers. Then, you are assigned credit scores in points.Points
You can get a score ranging between 300 to 900 points, higher the points better the FICO Score and in turn better chances for you to get the credit under discussion and vice versa.
Different lenders follow different limits and standards for evaluation of credit worthiness. Some strictly follow only the FICO score while other may also take into account your current income, assets owned and current employment. U.S. law prohibits personal information such as race, sex, religion or marital status to be disclosed for credit checks.
It is time dependable
The FICO score is checked up on when you apply for the credit. Therefore, it is time depended. Since credit bureaus only calculate your score at the lender’s request, it will be established on the information in your file at that specific credit bureau, at that specific time only.
You can achieve and maintain your FICO score by paying all your bills on time, not applying for credit too frequently and reducing your credit card balances.
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