What Your FICO Score Means to You
Your FICO, or Fair Isaac credit score, affects virtually every facet of your financial life, believe it or not. It ranges from 300-850. More and more lenders, prospective employers, and insurance carriers are considering your credit score when making decisions on you. This number tells so much about your financial dealings, payment history, reliability, and credit risk assessment than any other indicator.
With credit becoming scarce these days, more and more people are going to face paying higher interest fees, insurance premiums, and possibly even missing a job opportunity due to their credit score. Learn the essential components of your FICO score, where you stand, and how you can save money by increasing your score now.
Video: What FICO Means to Your Credit Score
FICO Explained
Your FICO score is a complex mathematical summary based on your financial past. What this past consists of will determine your future, in more ways than you may now realize. FICO scores are composed of several factors, each with a varying degree of significance (in percentage) in your credit score determination.
35% of your FICO credit score is comprised solely on your ability to make payments on-time. This includes every type of credit extended to you. From revolving credit such as credit cards, to secured loans like a mortgage, to unsecured loans such as car payments, each payment you make is measured. The more completed on-time payments you have on your credit report, of course the better. Any missed or late payments will cost your score dearly.
30% of your FICO credit score is comprised on your debt to income ratio. Meaning how much credit are you extended, and how much have you already capitalized. For example if you are extended a total of $50,000 credit, spread out over several credit card limits and a car loan, that amount is your total credit availability. If you have only charged up $5,000 plus another $10,000 for your vehicle loan, you have capitalized $15,000 total of your available credit, or 30% capitalized. This will not reflect poorly on your credit score, in fact only capitalizing 30% is a good number. However if you had $45,000 of that available $50,000 in credit capitalized, you would be at 90%. This looks bad on your credit profile as it shows you are using near every amount of credit you currently have offered to you.
15% of your FICO credit score is based on the length of your accounts with your creditors. Overtime, most behaviors take on a pattern. Your financial dealings are no exception. With a long history of good credit management, your FICO score will reflect this responsible behavior with higher numbers. Never close an old account, even if unused.
10% of your FICO credit score is affected by your amount of inquiries, or checks into your credit score by potential lenders. This is because too many inquiries signals a warning to FICO that you are potentially “credit shopping” and looking for sources of money in too many places.
10% of your FICO credit score is based on information provided in your account such as employer, addresses, contact information, etc. This remaining 10% is compromised basically of the details of your personal information, and any potential inaccuracies therein. To be sure there are other things that if added to your credit report will reduce your overall FICO score, such as a bankruptcy.
What Your FICO Score Doesn’t Say
Under State and Federal law, it is illegal for the credit bureaus, credit issuers, or any other lending institution to consider any of the following items in your FICO score, or in consideration for a loan of any sort:
Age
Gender
Race
Marriage Status
Sexual Orientation
How to Improve Your FICO Credit Score
There are numerous ways and paths to a higher credit score. Obviously you should start with making responsible credit choices, paying your bills on-time, and never defaulting on credit extended to you. There are more options though for those caught up in the cycle of bad credit. A bad credit score will most likely prohibit you from getting more new credit lines, which would in time increase your credit rating. So you become stuck in a cycle you cannot get out of without help. In this situation there are credit repair specialists available to you, able to help get your credit back on track.
Video: Proportions of Balances to Credit Limits
Credit Repair Specialists:
Lexington Law
http://www.lexingtonlaw.com/
PO Box 510290
Salt Lake City, UT 84151
(800) 214-0922
Sky Blue Credit Repair Services
http://www.skybluecredit.com/
131 North Swinton Avenue
Delray Beach, FL 33444
(800) 790-0445
Key Credit Repair
http://www.key2creditrepair.net/
(617) 265-7900
686 Morton Street
Boston, MA 02126-1571
Ovation Credit
http://www.ovationcredit.com/
(866) 639-3426
P.O. Box 56137
Jacksonville, FL
32241-6137
Apex Credit Services, LLC
www.apexcreditservices.com
(888) 727-4818
2919 Shadyside Road
Saint Albans, WV 25177
My Credit Group
www.mycreditgroup.com
(800) 430-7494
820 Los Vallecitos Blvd., Suite F
San Marcos, CA 92069