What is a FICO Score
A FICO score is one essential part have knowing how to manage your finances. The number is determined using a very difficult and confusing system used by lenders and underwriters. It is not necessary to know everything about this system but knowing a thing or two can prove to be a large benefit to you in keeping up your score. The more your know about the system, the more you can use it to your advantage and this is really the way of keeping your credit score afloat. It is key.
The first thing you need to know is the basics of how the FICO system works and what qualifies you for good or bad credit. The highest score you can get in 850. This should be common knowledge but I have been surprised time and time again at the number of people that don't know this basic thing. If you did not know, don't worry. After today, you'll know a lot more than most. The ideal range for your credit score is 720 to 850. This is extremely good. Again, don't worry if this isn't you. If you score is about 675, you are still in very good shape. If it's below 675, there may be some trouble borrowing money in the future. 300 is the lowest.
Your FICO credit score is made up of a number of factors. Thirty-five percent of your credit score is based on how punctual you are with payments. Any payment over thirty days late can be reported to the credit bureaus and lower your score. Thirty percent of your score is also based on your total debt -- the ratio of revolving debt, like credit card balances, to available revolving credit, such as your credit limit.
15% of the FICO score is based on how long you have had credit. Not only credit in general, but also a particular line of credit. If you have a car payment and have made regular payments for the last three years, this is actually better than paying it all off in cash. At least for your credit score. There is a point of diminishing return though so this isn't always the smartest move.
Lastly, there are a few things to go over that can adversely affect your credit score that we have not yet talked about. if you have a bankruptcy, owe monies to a court judgment or tax lien, all of these can hurt your overall credit score very significantly. The number of credit lines you have open is also important. If you open a fifth line of credit to increase your debt/credit ratio, you are likely doing more harm that good. be watchful also of the number of times you pull you score. Each time you pull it, it counts against you as a credit inquiry. Some hurt worse than others but just be careful.
The first thing you need to know is the basics of how the FICO system works and what qualifies you for good or bad credit. The highest score you can get in 850. This should be common knowledge but I have been surprised time and time again at the number of people that don't know this basic thing. If you did not know, don't worry. After today, you'll know a lot more than most. The ideal range for your credit score is 720 to 850. This is extremely good. Again, don't worry if this isn't you. If you score is about 675, you are still in very good shape. If it's below 675, there may be some trouble borrowing money in the future. 300 is the lowest.
Your FICO credit score is made up of a number of factors. Thirty-five percent of your credit score is based on how punctual you are with payments. Any payment over thirty days late can be reported to the credit bureaus and lower your score. Thirty percent of your score is also based on your total debt -- the ratio of revolving debt, like credit card balances, to available revolving credit, such as your credit limit.
15% of the FICO score is based on how long you have had credit. Not only credit in general, but also a particular line of credit. If you have a car payment and have made regular payments for the last three years, this is actually better than paying it all off in cash. At least for your credit score. There is a point of diminishing return though so this isn't always the smartest move.
Lastly, there are a few things to go over that can adversely affect your credit score that we have not yet talked about. if you have a bankruptcy, owe monies to a court judgment or tax lien, all of these can hurt your overall credit score very significantly. The number of credit lines you have open is also important. If you open a fifth line of credit to increase your debt/credit ratio, you are likely doing more harm that good. be watchful also of the number of times you pull you score. Each time you pull it, it counts against you as a credit inquiry. Some hurt worse than others but just be careful.
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