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What Is A Credit Score?

We now know why a good credit score is important. So what is a credit score?

First let's clear up the terminology. You will often hear credit scores referred to as FICO scores.

What Does FICO Stand For?

A company call Fair, Isaac and Company developed the credit score rating formula that all credit bureaus and lenders use. The credit score is now commonly referred to as the FICO score (from Fair, Isaac & Company) and the two terms are interchangeable.

Your credit score or FICO score is not a single number. There are 3 major credit bureaus that provide credit scores. The credit score from each can be slightly different.

Here is an outline of the basis for determining your credit score or FICO score. Each number represents the percentage of that information that makes up your credit score.

35% is based on your payment history -
Do you have a record of late credit card payments, delinquencies or bankruptcies? The more late payments on record and the more recent they have been, the more negatively they will affect your score.

30% is based on the amounts you owe -
This not only includes how much you owe but how much of your available credit you have used. If you consistently use 75-80% or more of your available credit (for example, keep your credit cards at or near the maximum), your score will be lower than if you are using a small percentage of the credit available to you.

15% is based on the length of your credit history -
How long you have had accounts and credit, factor into your credit score. Credit cards that you have held for a long time give you a higher score than new credit cards.

10% is based on how much new credit you have requested -
If you have requested a lot of new credit in a relatively short period of time, you are considered to be a higher risk than someone who has applied for less credit.

10% is based on the types of credit you use -
This includes mortgages, loans, and credit cards. If more of your debt is high interest credit cards, you may be considered a higher risk than someone whose biggest debt is their mortgage.

So What is a Credit Score And When Is It Considered Good?

FICO scores range from about 300 to 900.

In general, the higher the score, the lower the credit risk. Because lenders have somewhat different standards for how much risk they will accept, a credit score that is considered acceptable by one lender may not be accepted by another.

What is a good credit score? According to Craig Watts, Fair Isaac's spokesperson "The very best rates go to people with scores above 770, but a score of 700 is considered good".

The average score is somewhere around 725.

What is a credit score and when is it considered 'good' according to E-loan, a major online loan company? Here is their credit score scale.

FICO Score Chart

  • Above 730 Excellent credit
  • 700 - 729 Good credit
  • 670 - 699 Lender will take a closer look at your file
  • 585 - 669 Higher risk; you will not be eligible for the best rates and products. Credit products may not be available.
  • Below 585 Credit options will be limited or not available. Lender will need to consider other information in your application.

You may want to let a law firm remove the negative items from your Credit Report and help you raise your FICO score. Lexington Law has been a trusted leader in credit repair since 1991.

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What is a Credit Score?


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Suze Orman says:

  • When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you.

  • FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus – Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well.

  • Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time.

  • Taking steps to improve your FICO scores can help you qualify for better rates from lenders.

  • Click here for more information on myFICO.com Products!




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