What is a FICO Score?
Potential employers, lenders, insurance companies, even utility providers, can access your credit score to evaluate how risky it could be to work with you. This FICO score is the product of a partnership between Equifax — one of the three main credit bureaus, along with Experian and TransUnion — and Fair Isaac Corporation (FICO). Together they created the original information tracking software that led to the now-standard credit risk measurement system used today. The three credit bureaus collect, record and maintain information used to generate your credit report and score.FICO scores range from 300 to 850. The higher your score, the more you’ll see lower interest rates and higher credit limits. The lower your score, the more you’ll pay for credit.
It Takes Time
Just like it took time and effort to earn, maintain, or improve your grades during your school days, the same applies to your credit score. However, putting in the time to raise that score can pay off when it comes to car or home loans, or even a credit card. Here are a few tips to maintaining a good score (700 or above):
• Make payments on time.
• Keep total debt low. Experts say your monthly debt payments should be less than 36 percent of your gross monthly income.
• Keep old accounts open (if possible) for longer lending history.
If you’re looking to improve your score, be sure to:
• Annually check your credit report.
• Set up reliable payment reminders.
• Reduce the amount of debt you owe.
• Be patient. Most items stay on your credit report for seven years.
• Avoid taking out credit you don’t need.
As part of the Fair Credit Reporting Act (FCRA), you are entitled to one free credit report from each credit-reporting agency each year. This is a great way to check the pulse of your credit history. The FICO score is used in over 90 percent of lending decisions to determine potential liability and risk. Pay bills on time, borrow wisely, and keep track of your record to build the best possible score.