| As I am not from the US, I had no idea what FICO | | | | the FICO score calculation. |
| meant before researching it. FICO stands for Fair | | | | 3. Length of credit history. |
| Isaac Corporation, a company based in California. | | | | Another important factor that makes up 15% of your |
| FICO, put simply, is a person's credit score. A credit | | | | FICO credit score is the length of your credit history. |
| score can be used by a potential lender in making a | | | | The longer your credit history, the better for your FICO |
| judgement on whether to grant you credit or not, for | | | | score. Additionally, though, a long history with any |
| example when you apply for a new credit card or | | | | particular lender will be good for your credit score. |
| home mortgage. Therefore, if you are in the US, the | | | | 4. Type of credit mix. |
| FICO score is very important to you. | | | | The fourth factor taken into consideration is the type |
| What Does a FICO Score Do? | | | | of credit mix that you have. For example, do you have |
| A FICO score places a value on the types of credit | | | | only high risk unsecured type credit, or do you also |
| accounts you hold or have held, and your credit history | | | | have some solid secured loans such as a home |
| in maintaining those accounts. The FICO score scale | | | | mortgags? Those consumers who have a mix of |
| ranges from 300 to 850, with the majority of people in | | | | credit have higher a FICO score. This fourth factor just |
| the United States in the 600 - 850 range. | | | | counts for 10% of the total FICO score. |
| Factors Which Affect Your FICO Credit Score | | | | 5. Number of new credit applications. |
| There are 5 factors in all which determine your FICO | | | | The last factor in the FICO rating is the amount of |
| credit score: | | | | new applications that you fill out. If you have recently |
| 1. Your payment history. | | | | filled out a lot of credit applications, this will hurt your |
| This counts for a very significant 35%--the most of the | | | | score because it puts lenders "on alert" that something |
| FICO score factors. As you would expect, paying your | | | | may be wrong. This part of the score is worth 10%. |
| bills on time is gets you a good score, while paying | | | | Lenders themselves will normally look at employment, |
| them late on a consistent basis is will mark down your | | | | income, length at current residence, and marital status, |
| FICO score. If you have had debts referred to a | | | | but these do not affect your FICO score. If you intend |
| collection agency, that is worse still, while declaring | | | | to borrow in the future, you do need to pay attention |
| bankruptcy is the worst of all. | | | | to your FICO score. If your FICO score is low, this |
| 2. How much you owe. | | | | could lead to higher interest rates, extra mortgage |
| Another obvious factor that FICO will take into | | | | insurance when buying a home, and in some cases |
| account in arriving at a credit score. This accounts for | | | | denial of the loan. |
| another 30% of your total FICO score. It is not just | | | | If you plan to take out a major loan, such as a home |
| what you owe already that affects your FICO score. | | | | mortgage, it could be a wise move to get a copy of |
| Also taken into account is the amount of credit | | | | your credit report 6 months before you plan to apply. |
| available to you. For example, if you have a credit line | | | | That will give you time to look over your history, to |
| of $5000, but have so far only used $1000, that will be | | | | ensure there are no discrepancies. If you find |
| taken into account. | | | | inaccuracies, contact the Credit Reporting Agency in |
| Your total amount of credit will be totalled, and | | | | writing. They will have 30 days to investigate it, and |
| compared to your annual income. So, loans such as | | | | then correct it if they find your claims are true. You |
| car loans, mortgages, credit cards, store cards, will all | | | | may also want to ask for a revised credit report; they |
| be added together. Those who use most or all of their | | | | are required by law to supply you with one if an |
| available credit will get a lower rating for this part of | | | | inaccuracy is found and corrected. |