What You Don't Know About Your FICO Score Can Cost You Money
It's important to obtain copies of your credit report from the three major
credit bureaus and review them for accuracy, but if you want to know how a
potential lender views you, it's important to know your credit or FICO score.
FICO comes from the Fair Isaac Company, which came up with the process of
condensing all of your credit information into one three-digit number.
The importance of your FICO score doesn't end there. It's also used in
determining your interest rate, the amount of your down payment and the variety
of mortgage types available to you if you're buying a house, your ability to get
a car loan, the premium on your auto or homeowners insurance, determining lease
factors, and even your ability to get a job.
If your FICO score is on the low side, you'll pay a higher interest rate on
loans and credit cards. To get the best interest rates, your score should be 720
or above.
What Is the Range of Possible FICO Scores and What Do They Mean?
FICO scores range between 300 and 850. Ratings are as follows:
~ Excellent: Over 750
~ Very Good: 720 or more
~ Acceptable: 660 to 720
~ Risky: 620 to 660
~ High Risk: less than 620
How Is My FICO Score Calculated?
How Can I Improve My Credit Score?
The best way to improve your credit score is to pay your bills on time and
manage your credit wisely. The most important item is your mortgage. Make sure
you pay it on time every month. Installment loans, where you borrow a set amount
to buy new furniture or appliances, for example, are given more weight than
credit cards.
Keep your borrowing below 50% of your credit limits, because your FICO score
will be lower if you are maxed out on your credit cards. Don't have more than
two or three credit cards because a large number of credit cards also lowers
your FICO score. Don't apply for several credit cards at one time; it makes
lenders nervous and will lower your FICO score. Other factors also affect your
score, such as home ownership, which raises it.
How Can I Find Out What My FICO Score Is?
To find out what your FICO score is, visit the My FICO Web site.