How to Better Understand Your FICO Score

Your FICO Score is a three-digit number that determines the interest rate you will pay on your credit cards, car loan, home mortgage, as well as whether you will be able to get a cell phone or have your application for a rental home accepted.

FICO stands for Fair Isaac Corporation, and the way the world sees it, your FICO score is a great tool to size up how good you will be at handling a new loan.

Difficulty: Moderate

Instructions

Things You'll Need:

• All three credit reports
• Your FICO score

1. Your FICO score is based on your spending and bill-paying habits, and your overall debt load. Basically, ever financial decision you make is being watched, tracked and recorded. The people you do business with, from lenders and the phone company, constantly file reports on your financial activity to one of three major credit bureaus. These credit bureaus know what you have spent, what you owe, and if you pay bills on time or if you are late.

2. Since your FICO score is a calculation based on the history in your credit reports, your first priority is to make sure everything in your reports is correct.
   
   The three big credit bureaus are Equifax, Experian, and TransUnion. You can get free reports once a year through a website, which is listed under additional resources at the bottom of the page.

3. If you have errors on your credit reports, please try to correct them immediately. You can file a dispute against any old accounts or mistakes that should not be under your name.
   
   This process can take a while, so be patient, because it's worth correcting in the long run.

4. After you have your credit reports and have taken care of clearing up any mistakes, you are now ready to get your FICO score. Remember though, since there are three credit bureaus, you will have three FICO scores.
   
   Typically though you do not need to purchase all three FICO scores, just check on one from any of the three credit bureaus. If you are trying to get a loan, call the bank or company who will be granting it to find out which company they use to check FICO scores, and then go with that one for yourself. However, typically, mortgage lenders will check all three, as this is such a huge financial responsibility.

Tips & Warnings

• Don't fall for the cheaper "credit score" trick. It may seem applealing, but that is not what the banks and lenders are using to track you. They are using your actual FICO score.

Resources

• Credit Reports
• FICO Score

[bogdwell]

on 7/4/2009 As ebt colletor I know how important this score is.... 5*

[mashell3752]

on 6/11/2009 Very good.