Just What Is Your Credit Score And How Can It Impact On Your Borrowing?
Friday, November 14th, 2008Many people know that they have a credit record which is compiled by several major credit bureau and one very important part of your three bureau credit report is your FICO score. But what exactly is your FICO score and how does it affect your borrowing choices?
FICO is formed from the initial letters of the Fair Isaac Corporation who developed this system of credit scoring and is a number which is generally betwen 350 and 850 that ranks your credit worthiness using the proprietary algorithm devised by the company, with 350 being the worst score and 850 being the best.
Though the algorithms are a tightly guarded secret, over the decades a lot of people have reverse engineered many of the more important elements. For instance, any late payments will lower your score and the greater the number of late payments you have and the later those payments are the more heavily your score will be lowered. Another factor is the total amount of debt which you carry each month. Another not quite so important factor is the number of credit cards you hold and the number of credit checks undertaken out on your account.
Any score of less than about 620 is considered marginal and a score below 580 is decidedly poor. A FICO score of 720 or more is very good to excellent. A FICO score that falls between 620 and 720 represents a kind of gray area in which items other than merely your FICO score will play a more significant part in any lending decisions.