What is Fico Score?

What is FICO Score? We have all heard of this score before, but sometimes we just need the FICO score explained. Here are some facts about FICO Score to help you get an idea of how it works and why it was created.

What is it and Why Was it Made

The FICO Score or credit score was created by Fair Issac and Co. in order to track how trustworthy a borrower is and how risky it is to lend to them.

The higher the score the more likely it is that they will payback a loan. The lower the score the more likely it is that they will not payback a loan.

Just to give you an idea as far as banks are concerned if your score is below 500 you have an 87% chance of having a late payment of 90 days or more in the next 2 years. On the other hand if your score is above 700 you only have a 3% chance of having a late payment of 90 days or more in the next 2 years.

This score is viewable by lenders, Landlords, employers, and basically anyone who you enter a business relationship with. So, obviously it is pretty important and having a good score will play a large role in the quality of your life.

What Factors Influence Your FICO Score

This score has a gigantic influence in your lifestyle, but what factors influence your FICO score? The FICO score is calculated by the three big Credit companies; EQUIFAX, Experian, and Trans Union. They each take your information and come up with their own scores. Then these three scores are then used to make your official credit score.

For more about the FICO Score and how it is determined here are the official factors used to calculate the scores and the percentage of the score that they affect.

• Payment History – 35% of score

• Amount Owed – 30% of score

• Length of Credit History – 15%

• Types of Credit Used – 10%

• New Credit Activities Such As A New Loan – 10%

What is a Good FICO Score?

In general anything over 700 is considered to be a good score. Anything below 700 but above 620 is considered average and everything under 620 is considered high risk for lenders.

That is a pretty general idea of what is good and what is bad, but if you want a more detailed FICO Score explanation visit this page on FICO Score Ranges.

How to Build FICO Score

Now that you know what is FICO Score and what is considered good, how do you increase it? There are a few different ways to build your FICO Score, these include;

• Take out Loans and pay them back

• Cosign on loans with others who have high credit scores

• Don’t spend more than 30% of your available credit limit.

All and all it is pretty important to pay attention to this score. Now that you have seen the FICO Score explained it is up to you to use the information to keep your score high. If you are being financially responsible it really shouldn’t take a lot of effort to do, but it can be a big influence in your life.

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