A Beginner’s Guide to Your FICO Score
NEW YORK, February 3, 2023 (Newswire.com) - iQuanti: Like it or not, the financial world judges you based on your credit score. Your FICO credit score is a number (ranging between 300 and 850) that represents your creditworthiness, or how likely you'll be able to repay the lender. Read on to learn what a FICO score is, what factors can influence it, and how you can improve yours.
How your FICO score works
A FICO score is the credit rating determined by the Fair Isaac Corporation, a data analytics company that originally developed credit scores. FICO uses credit history reported to the major credit bureaus (Experian, Equifax, and TransUnion) to determine how reliable of a borrower you'll be.
You may be wondering if there's a difference between a FICO score vs. credit score. Your FICO score is a specific type of credit score. It's the most widely recognized and used by many lenders in their application decisions.
However, FICO is not the only type of credit score. Competitors such as VantageScore can also be used to determine your creditworthiness. When checking your credit score, it's important to know whether the number being reported is your FICO score, VantageScore, or some other variation.
What factors affect my FICO score?
FICO's website makes it clear what data from your credit history is used when calculating your credit rating. This can be summarized into five major categories:
- Payment history (35%) - Were your payments on time and meeting the minimum requirements?
- Amounts owed (30%) - How much of your total available credit are you using?
- Length of credit history (15%) - How old is your oldest active credit line?
- New credit (10%) - How often have you applied for new lines of credit?
- Credit mix (10%) - How many different types of credit do you have (credit cards, retail cards, a mortgage, other installment loans)?
How to improve your FICO score
Raising your credit score is rooted in practicing good, responsible financial habits. Here are a few tips you could use to increase yours.
- Set your payments up for autopay. That way they'll always be paid on time and in full.
- Use your credit modestly. Many experts recommend keeping your credit utilization ratio, the amount of credit that you've used divided by your credit limit, to 30 percent or less.
- Don't cancel old credit cards. Though it can seem counterintuitive, leaving old credit cards open that don't have an annual fee will actually add to your length of credit history and positively impact your credit score.
- Apply for new credit sparingly. Each new credit inquiry will count against your credit score. Only apply when it's necessary.
- Maintain a mixture of credit lines. It's okay to have multiple loans and credit cards. Lenders like to see that you can manage multiple lines of credit.
The bottom line
FICO scores are the most recognized and widely used type of credit score. They're calculated by taking input from your credit history and using it to determine your creditworthiness. You can improve your credit score by practicing good financial habits, such as paying your bills on time and using your credit lines moderately.Contact Information:
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Original Source: A Beginner's Guide to Your FICO Score