FICO is formed from the initial letters of the Fair Isaac Corporation who devised this system of credit scoring and is a number that is usually between 350 and 850 which ranks your credit worthiness according to the proprietary algorithm formulated by the company, with 350 being the poorest score and 850 being the best.



Despite the fact that the details of the algorithms are a tightly guarded secret, over the years many people have be able to word out many of the more important elements. For instance, any late payments will lower your score and the more late payments you have and the later those payments are the more heavily your score will be affected. The total amount of debt which you carry each month is yet another factor. A not quite so important factor is the number of credit cards you have and the number of credit checks carried out out on your account.

Any FICO score under approximately 620 is considered as marginal and a FICO score below 580 is decidedly poor. A FICO score of 720 or more is very good to excellent. A FICO score that comes in between 620 and 720 represents something of a gray area in which factors other than your simply your FICO score will play a more significant part in any loan decisions.

Mortgage companies, banks, credit card companies and other lenders will use your FICO score as an extremely important element in deciding whether to make a loan. These lenders will also take your FICO score into consideration when setting the interest rate to charge you. Everything else being equal the greater your score the lower the interest rate you will have to pay.

A lot of the time of course everything thing else is not equal and general interest rates, the overall demand for loans, the overall economy and a host of other factors have a substantial influence on whether lenders will lend and at what rate.

Another very important factor noe is the use of computers which has changed the financial industry tremendously during the past 20 years and given consumers far more fast and simple access to services and products through the Internet.

Despite all these changes your FICO score is still a primary tool for the majority of lenders and, although it might not determine the final decision, it most assuredly influences the 'first cut' when lenders are faced with a pile of applications to approve or disapprove.

Happily for those who have financially slipped there are choices and even if your credit score is low you nonetheless have several options. The first thing to do however is to set establish a plan to increase your score.

As you gradually remove those outstanding debts by paying them down or negotiating with your lender your score will slowly increase. And bear in mind that the age of your 30 and 60 day past due and late payments is a factor in computing your score.

At the same time as impoving your score you can also shop around for other lenders who are willing to take a higher risk by lending you money. The problem of course is that those loans nearly always carry a higher rate of interest. If you can your best course of action is to try to go without borrowing for a while while you work to improve your FICO score.