Your FICO score reflects your credit worthiness. You cannot get a mortgage or car loan without your FICO score being scrutinized by lenders. Where your score falls in the spectrum of 300 to 850 will determine whether you qualify for a loan, your credit limit and the interest rate you will be charged. Some prospective landlords and employers also use FICO scores as a part of the screening process.
What
About 40 percent of the population has FICO scores of 750 or above. The scoring system uses a complex mathematical model to analyze and weigh five types of information on your credit report: payment history (35 percent); debt burden (30 percent); the length of credit history (15 percent); new credit accounts and recent credit inquires (10 percent), and the types of credit accounts (10 percent).
How
You can raise your FICO score by being proactive in your financial life:
· Maintain low credit card balances and pay your bills on time.
· If you have trouble keeping up with your bills, contact your creditors to explain your situation and try to negotiate for an extension or smaller installments.
· Keep unused credit card accounts, especially if they have a sizable credit limit and a long history.
· Avoid opening multiple credit card accounts over a short period of time.
When
Public financial disasters, such as bankruptcy, foreclosure and tax liens, can damage your FICO score quickly. Their impact will ultimately fade over time but it may take years for your score to recover. A personal bankruptcy filing can stay on your credit report for 10 years.
Who
Each individual has three FICO scores issued by three different major credit bureaus. These bureaus operate independently and actually compete with one another. They can be accessed at equifax.com, transunion.com, and experian.com. Any entity that extends credit to a consumer is eligible to file a report with the credit bureaus. Examples include banks and other lending agencies, child support agencies, utility companies and property management companies.
Why
Why should you check your FICO score on a yearly basis? If your credit score is high, it can give you the confidence that you can access credit and respond to unexpected financial circumstances. If your score is unexpectedly low, it should prompt you to investigate for potential errors and identify theft on your credit report. Keep in mind that your FICO score reflects all relevant data on your credit report, whether they are accurate or not. You can check your FICO scores from all three credit bureaus at myfico.com.
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