Fico Score

A FICO score measures a consumer's credit-worthiness without accessing his or her employment status or income history. FICO Scores were originally developed by the Fair Isaac Corporation in 1956 and became widely used by the major credit reporting bureaus since 1989.

Banks, financial institutions and lenders use a customer's FICO score to decide a consumer’s credit limits and interest rates. FICO score is the most widely used credit scoring system in the world today and is made available through all major consumer reporting agencies in the United States and Canada.

FICO score is a single (three-digit) number that reveals to potential creditors how much of a risk a potential consumer is. A FICO score may differ and is dependent upon the set of data used to compute the FICO score with. FICO uses data generated from the credit reporting bureaus to compute its credit scores. Every credit bureau uses a different set of data to generate its FICO scores.

A fico score takes into consideration of your payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%). Race, nationality, religion, sex and marital status are not included in calculating your credit score.

A FICO score also called credit score offers the most reliable way for evaluating credit and it is most widely embraced by most lenders. Credit scores examine your debt (the amount you owe on all your accounts), the number of all your accounts with their balances, and how much of your available credit you are currently using.

There are several ways through which a consumer can improve one’s FICO score. These steps include and are not limited to:

Making your payments on time: On time payments can improve a consumer’s credit score because payments that are 30 days late or overdue are reported to the credit bureaus. This will impact a consumer’s credit score negatively; thereby bringing one’s FICO score down;

Statistics has it that 80% of credit reports are inaccurate. This concludes that 80 out of every 100 credit reports are erroneous. Consumers should check their credit reports for inaccuracies and dispute them as soon as they are found.

Accurate reporting of, and posting of credit lines is very essential to improving your credit score. Some creditors may deliberately fail to report or post credit lines to consumer’s reports to make such consumers less desirable to their competitors. Make sure that your credit lines are accurately reported by your creditors in order that your credit score will be affected positively.

Paying down your debt and avoid maxing out your credit cards. How much debt one owes is the second largest factor that affects one’s FICO score. The more debt a consumer owes, the less the consumer’s FICO score

Length of a consumer’s credit history is another important factor that affects one’s credit score. Some consumers have the habit of closing old accounts. This may affect a consumer’s credit score especially if a consumer closes old positive accounts. Therefore, if you have old positive accounts, keep them open. They will add to the length of your credit history and improve your credit score.

Be cautious when applying for new credit. Each time a consumer applies for a new credit line, a loan or a new credit card; an inquiry is generated to your credit report. Since this may affect your FICO score negatively, one should be cautious when applying for credit. Do it when it is absolutely necessary.

Revolving Accounts should be kept open but debt must be manageable. Keep about four revolving accounts open and keep the dept minimal.