FICO credit score is one of the major and most trusted credit score system existing in the US. Introduced in 1986 by FICO which was known as Fair, Isaac and Company at that time. FICO model is widely used by major banks and creditors as it is based on consumer files of three national credit bureaus: Experian, Equifax and TransUnion.
Credit scores as calculated by FICO are based on numerous calculations and while FICO doesn’t disclose the formulae, it does provide some basic information on its website.
How a bad score affects your access to financial assistance
Your FICO credit score can impact your access to financial loans and credit big time, ass a poor FICO score means poor credit score, you’ll always end up paying more interest or getting your loan deal rejected if you happen to have a bad FICO score. Moreover, these days there is even a provision for incentives on vehicle purchase and lease that are only given according to your credit score ad this FICO credit score comes in handy even there as well.
So what is a good FICO score?
There are several types of FICO score which are concerned with specific kind of assistance one needs. Here, we are concerned with FICO credit score that assesses your credit history and this one is the most important while securing a financial loan for automobiles.
A FICO score has a range between 300 and 850 where
- 800+ is exceptional.
- 740 to 799 is very good.
- 670 to 739 is good and represents the median credit score range.
- 580 to 669 is below average.
- 579 or less is poor
Factors affecting your FICO score
FICO score always depend on some basic factors which are taken into consideration for calculating your personal credit score assessment. Here is a list of those factors with the percentage measure of how they affect your FICO score.
- Payment history: 35 percent.
- Amount of debt: 30 percent.
- Length of credit history: 15 percent.
- New credit: 10 percent.
- Credit mix: 10 percent.
How to improve your FICO score
Improving your FICO score involves first finding our what is your FICO score so you’ll need to get a FICO assessment of your financial credit score to have something to work upon. The good news in this is that since the enforcement of FACT act, each citizen of America is entitled to a free credit score report each year. The law requires all three agencies to provide a report so you can get your Free FICO score anytime from Annualcreditreport.com which is owned and run by the same agencies.
So once you have your Free FICO score, these are the steps that can help you improve your credit score for future loan perspectives
- Pay your bills on time. Paying even a few days late has an impact, so set up payment reminders and settle accounts as soon as they are due.
- Keep your balance low on credit cards.
- Pay off debts rather than moving them. Owing an amount of money on a single account is often better than owing the same amount across several accounts.
- Don’t open new credit accounts until you need them. Opening several accounts in a short period often lowers your credit score.
FICO is the most commonly used credit report system in the USA, an unfavourable score will always mean you have less access to financial assistance so it is always advised for you to maintain the best FICO score you can and not do something outrageous that can affect this rating of yours.