Your FICO Score
Most consumers are aware of the fact that their credit score has a major impact on their borrowing opportunities and interest rates; however, many lack the knowledge necessary to produce and maintain a high FICO score. If you are eager to make yourself a creditworthy individual, educating yourself on the basic principles of credit score calculation is a wise first step. By becoming more knowledgeable about the elements that determine your FICO, and learning some specific things you can do to guide your FICO in the right direction, you can likely increase your score or keep your high score stellar.
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Multiple FICO Scores
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Every individual has three different Fair Isaac Corporation (FICO) scores. The three credit reporting bureaus, Experian, TransUnion and Equifax all calculate their own FICO for each consumer based upon the credit information they have in their records for that individual. When you apply for credit, the creditor may check one or all of these credit bureaus when trying to determine your credit worthiness.
FICO Range
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FICO scores all fall on a range of 300 to 850. The higher your FICO score, the more creditworthy lenders will take you to be. The average consumer's FICO falls in the 600s and 700s. Individuals whose FICO scores are about 750 are considered very good credit candidates. Those whose scores are below 600 are considered credit risks.
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FICO Score Elements
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Five different elements go into calculating your FICO. Each of these elements weighs differently upon your resulting score. The strongest element is payment history, making up 35 percent of your score. Amounts owed on credit accounts is the next most significant item, making up 30 percent of your score. The length of your credit history makes up 15 percent of your score. The final two elements, amount of new credit and types of credit used, each make up 10 percent of your credit score.
FICO Improvement
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Your FICO is constantly in flux, so improving this numerical value is possible. If your FICO currently sits below the level you would like, take strides to bring up. Start by inspecting your report for errors. If you find any, contact the agency responsible for the report and request that these mistakes be corrected. Next focus on improving your credit by paying your bills on time, paying down your credit accounts and paying off credit cards. While none of these things will instantly rehabilitate your score, over time, they will all lead to a score increase.
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