What Is a FICO Score and How Do I Make It Work for Me?
Whether or not you receive a loan and what interest rate you get on your credit card may be determined by something called a FICO score. Named for Fair, Isaac & Co., a California-based company that developed the credit score, the FICO score is the most widely used scoring method to determine credit worthiness.
Scores range from approximately 300 to 800 and are provided to lenders by the three credit bureaus, Equifax, Experian, and TransUnion. You also have access to your FICO scores, but will be charged a fee by each credit agency providing your report.
According to Fair Isaac, the credit scores of the American public are divided as follows:
? 499 and below 1 percent
? 500-549 5 percent
? 550-599 7 percent
? 600-649 11 percent
? 650-699 16 percent
? 700-749 20 percent
? 749-799 29 percent
? 800 and above 11 percent
A score of 720 or higher will probably get you the best interest rates on a home mortgage. Your credit card company looks at your credit score to decide whether or not to raise your credit limit or charge you a higher interest rate. The higher your credit score, the better you look to lenders and the lower your interest rates.
Raising your FICO score can make a big difference to your wallet. Some basic actions you can take to improve your score include paying your bills on time, lowering your account balances, and not taking on new debt.
Around the time you intend to apply for a loan, several factors can decrease your FICO score and, therefore, your ability to qualify for credit and low interest rates. First, order copies of your credit report from all three bureaus and correct any errors you find. Be sure that balances you have paid down are reflected on the report, along with closed accounts and settlements.
It's important to get your credit scores from all three credit reporting agencies. Each bureau may have different information about you as reported by retailers and creditors. Clerical errors at a particular agency may also result in a varying score. Lenders often look at all three FICO scores, and rather than using the average of the three scores, they may use the middle score to determine your credit worthiness. Finding out what this middle score is and doing what you can to raise it is to your advantage.
Second, pay what you can on your debt rather than moving it around. Consolidating your credit card debt may be tempting, but it could lower your FICO score. Here's why: keeping your account balances between 25% and 50% of your available credit, signals a responsible borrower. For example, if you have a credit card with a $2000 limit, you should keep your debt below $1000. The ratio of your credit card balance to your credit card limit will increase if you pile all of your debt into a couple of accounts, rather than keeping it spread out over several.
If you have three credit cards with limits of $2000 each, and you owe a balance of $1500 on all three combined, you have a total credit limit of $6000 on which you owe a balance of $1500. That's a debt to credit limit ratio of 25%. But if you consolidate your $1500 debt into one card with a $2000 limit, you increase your debt to credit limit ratio to 75%, an unfavorable factor in your overall credit score. For this reason, the best solution is to simply pay off your existing cards as quickly as possible.
Also important in making the most of your FICO score near loan time is keeping unused accounts open, for the same reason as listed above. Your debt to credit limit ratio will rise drastically if you close your unused accounts. Wait until you have secured your loan to trim inactive accounts from your credit report. Also refrain from applying for any new accounts during this time.
Paying off your debt in a timely manner, building a solid credit history over a lengthy period of time, and erasing errors from your credit reports can all help you make the most of your FICO score and, in the end, make the most of your money.
Resources:
Equifax 800 525-6285 http:///www.equifax.com
Experian 888 397-3742 http://www.experian.com
TransUnion 800 680-7298 http://www.tuc.com
Credit Damage 714 441-0900 http://www.creditdamage.com
Cathy Taylor is a marketing consultant with over 25 years experience. She specializes in internet marketing, strategy and plan development, as well as management of communications and public relations programs for small business sectors. She can be reached at Creative Communications: creative-com@cox.net or by visiting http://www.creditdamage.com or http://www.internet-marketing-small-business.com
Latest News
 BBC News | Credit Suisse plans 5300 job cuts after $2.5 bln loss MarketWatch - By Simon Kennedy, MarketWatch LONDON (MarketWatch) -- Credit Suisse said Thursday that it will cut roughly 5300, or 11%, of its jobs after posting a loss of ... Credit Suisse to Eliminate 5300 Jobs After Losses This Quarter Credit Suisse to cut 5300 jobs Credit Suisse cutting 5300 jobs after loss |
 Hürriyet | Investment-Grade Credit Risk Index Rises to Record in Europe Bloomberg - Credit-default swaps on the Markit iTraxx Europe index of 125 companies with investment-grade ratings climbed as much as 7 basis points, and was 5 higher at ... Credit-default swaps soar Credit insurance costs soar to new high RLPC-European secondary loan prices slide to fresh lows |
 Washington Times | SEC Approves New Credit-Rating Rules Wall Street Journal - "The big three credit-rating firms have failed investors' and played a significant role in the current financial meltdown, said SEC Commissioner Kathleen ... SEC strengthens credit rating agency rules SEC adopts new rules for credit-rating agencies US SEC strengthens credit rating agency rules |
Avnet, Inc. to Present at Credit Suisse 2008 Annual Technology ... MarketWatch - chairman and chief executive officer Roy Vallee will present at Credit Suisse's 2008 Annual Technology Conference in Scottsdale, Arizona this morning at ... Microchip Technology to Present at the Credit Suisse Annual ... Brooks Automation to Present At the Credit Suisse Annual ... |
OpenClose, MeridianLink Partner to Provide Complete Credit ... MarketWatch - MeridianLink and OpenClose will enable brokers and wholesale lenders to request and access credit information from any Internet connection and deliver ... |
Bad Credit on the Rise: 110 Million Americans Now Affected ... MarketWatch - NASHVILLE, Tenn., Dec 04, 2008 (BUSINESS WIRE) -- The number of consumers with bad credit has risen sharply since 2007, with more than 110 million in the US ... |
Williams-Sonoma amends its credit agreement CNNMoney.com - NEW YORK (Associated Press) - Home-decor retailer Williams-Sonoma Inc. said Thursday it amended a credit agreement and a commercial letter of credit ... |
Nonbank Firms Like Avis Seek to Broaden US Relief on Credit Wall Street Journal - By JESSICA HOLZER WASHINGTON -- Commercial and industrial companies are clamoring for more federal action to unlock credit markets, saying that moves to ... Fed extends key credit programs through April 30 Fed lengthens lives of key credit programs Business Highlights |
Photronics Amends $155 Million Revolving Credit Agreement and ... MarketWatch - Under the amendment, the Company has through December 12, 2008 to finalize revised terms and conditions of the credit agreement. The Company also announced ... |
Egypt's EDB Bank gets $20 mln credit line Reuters - CAIRO, Dec 4 (Reuters) - Abu Dhabi's Arab Trade Financing Programme has extended a $20 million line of credit to Egypt's Export Development Bank EXPA. ... |
Resources
-
Bad Credit Loans, Bad Credit Credit Cards - YoureApproved.org!
Personal loans, Credit cards from bad Credit lenders including bad Credit loans - high risk unsecured bad Credit cards - debt consolidation loans - payday loans!
-
Bad Credit Loans - Personal Loans - Credit Cards - Home Loans - Auto Loans - Credit Repair
Bad Credit loans and Credit cards - personal loans - high risk loans - Credit repair - free government grants - government auctions - police auctions - debt consolidation - filing bankruptcy
-
No Money Down - Creative Real Estate Investing!
Learn how to control real estate Without Credit checks and no money down! You can Buy With No Credit!
-
Pass Your Class - Pass Your Clep Tests - Guaranteed!
Pass your CLEP tests - Guaranteed! Pass or Pay Nothing. 98% of all students that study our materials PASS!
-
Debt Elimination that Works: Remove All Your Debt, including Credit Cards and Mortgage in 3 to 5 yea
Debt Elimination that Works: Remove All Your Debt, including Credit Cards and Mortgage in 3 to 5 years.
-
Access Loan.
15,000 Cash Loan - Even With Credit Problems.
-
Credit Repair in 1-3 Months!
Credit Repair - Repair bad Credit within 1-3 Months.
-
Profit in Real Estate Without Cash, Credit or Risk!
Profit in real estate without cash, Credit or risk. Learn how to make quick cash in real estate without owning property.
-
Repair Credit Reports
A Downloadable Credit Repair Guide Aff. Make 50% Comm.
-
Credit Repair
Great seller quick turn around. High payout.