Your FICO Score And Your Credit
In the late 1950s, Fair Isaac and Co. began a pioneering work on credit scoring, which became widely accepted and knows as FICO score. This credit scoring is a way of determining the fact that a borrower will pay their bills and establishing the creditworthiness of the borrower. A FICO score is the most widely used credit scoring system.
This score is based out of analyzing your credit history by taking into account your late payments, bankruptcy, charge-offs, collections history, any negative credit information, your late payments, the time taken to establish your credit, credit used versus credit available, your length of time at your present residence etc.
There are three credit bureaus, Experian, Trans Union and Equifax who will independently compute your FICO score so you may have 3 FICO scores. When you go to borrow money, the lender may refer to your FICO score from any one of these credit bureaus or may take the middle score from the three. Not only credit card companies and banks, even organizations like insurance companies, employers, property owners, government departments and even mobile phone companies use the same technique for determining your credit score.
The main reason why these organizations will look into your FICO score is to establish whether giving money to you is going to be risky or not and they also determine whether the money given to you is will be bad debt or not. They will use the credit score to determine whether to qualify you for a loan, what will be your credit limit and what will be the rate of interest offered to you on your credit.
At this point, you may be wondering that wont it be great if you could increase your FICO score. While you cannot increase your score in a short period, it can improve over a period, if you do not apply for credit frequently, because every time you apply the inquiries are made on your credit report that can have a bad effect on your scores. Another way is by paying your bills regularly and on time. If you are maxed out on your credit card, you may also look at the option of reducing your credit card balance. If you have a FICO score between 760 to 850 then it is a very good score.
