What is a FICO score ??
FICO stands for Fair Isaac Corporation. They invented credit scoring. Your FICO score is a way for lenders to evaluate your potential to repay a debt. The FICO score is a number from 300 to 850. Anything below 620 is considered a bad credit risk. Between 620 and 720 is considered a marginal credit risk and anything over 720 is considered an acceptable credit risk.
There are 5 main areas to the scoring. I'll give an overview today and then more details in future postings.
1) the first area is your past history of payments on debts. If you are on time with all debt payments, you get a high score.
2) The second area has to do with credit balances on credit cards. (not total $, but the percentage of your allowable limit). The more you use/carry, the lower your score.
3) the length of time you've had credit. The longer you have had a single line of credit the higher the score.
4) the number of times someone inquires into your credit score, the lower the score. Generally this occurs at your request, when applying for a new credit card or some other line of credit. Lots of new credit requests, means a lower score.
5) Different types of credit impact your score differently. More on this later.
Stay tuned as we delve more into this in future postings.