Your FICO score is a term used to measure your overall credit worthiness. It is based on the information provided in your credit report. The report, in turn, reveals information about your past and present payment patterns. It also lists details regarding your credit history and the different forms of credit you currently have.
In today’s world, you’ll find that your credit report and your credit score can make a big difference. Some employers will want to check your credit rating before hiring you. Certain car dealers will look at your FICO score before granting you a loan. Insurance companies, banks, and even landlords may also be interested in your credit standing.
An Inside Look at your Credit Report
Now that you understand the importance of having a good credit report, let’s break down the information that goes live score into one. First of all, a credit report reflects the current bills and loans that you have. It also shows whether or not you make payments on a timely basis. If a bank sees that you have a history of paying your bills on time, it will be much more likely to grant you a loan. Creditors use the payments you’ve made in the past as an indicator of how well you’ll make timely payments in the future
Your credit report will reflect the type of credit that you carry. It will list details regarding the credit cards you own, the types of car and home loans you have, and any other outstanding or unpaid balances you may carry. It also includes any debt you might have with banks, utility companies, telephone companies, hospitals, or any other organization.
The facts found on your credit report are the basis for your credit score. The various numbers are plugged into a complex formula in a computer-based used to generate the final score. The end result is a three-digit number. It ranges between 300 and 800; the higher the number, the better the score.
Your FICO Score
FICO stands for Fair Isaac Corporation, the company that developed the most widely used model to calculate a credit score. Only the information in your credit report is considered for your FICO score. The system uses both positive and negative information regarding your credit when calculating a final score.
Here are a few key points to remember for managing your score:
– Your history of making payments on time has a large impact on your final score. If you’ve missed credit card payments, mortgage payments, or are behind on certain loans, it will show up on your score. That said, an overall solid credit history may outweigh a few late payments.
– Owing money isn’t a bad thing, but owing too much of it can affect your score. The amount of debt you carry, compared to how much income you earn, is taken into account. The lower this ratio is, the better your score will be.