Your FICO score is your credit rating from a credit reporting bureau. The higher the number the better. The better FICO score allows you to have a lower interest rate on the money you borrow.
Of course for those of us that are debt free, we don't we need a high FICO score, since we no longer live on credit. But for those of us still working on our plan it could help to get us out of debt faster. Typically the lower the interest rate the lower the payment. This would allow you to add more money to your accelerator marginâ„?. Am I advocating consolidations, refinancing? Not at all!
I know the power of the Transforming Debt Into Wealth® debt elimination program. I am DEBT FREE; it's the only way to be. I get questions on FICO scores all the time. Typically I would not have much information on it, because it is not something that our program advocates. But I've searched out to answer some of the most frequent questions that I am asked about it. The first one I answered above, "What is a FICO score?"
The next popular question is, "What is a good and bad score?" FICO scores range from 300-850, most people score in the 600-700 range. Three national credit reporting agencies (Equifax, Experian and TransUnion) are the ones that do the rating and give this information to lenders. Most lenders feel that a sign of good financial health is a FICO credit score above 700. A higher risk to lenders would be a FICO score below 600. This would cause a lender to deny credit or charge a higher interest rate.
"What exactly is being rated to get my FICO score?" There are 5 parts to your FICO credit score. How much you owe, your payment history, length of credit history, new credit and other factors. How much you owe is the amount you owe on all accounts, the number of accounts that have balances due and how much of your available credit you are using. Your score will be lower, the more you owe towards that credit limit.
Your payment history will lead to a high score with on time payments. This is also the area that a bankruptcy will hurt the scoring.
The longer amount of time you have on your credit history the higher this portion of your score.
About 10% of your FICO score is weighed by the number of new accounts you open or apply for. When looking for a loan it should be done in a short time span. Having a creditor look for a single loan versus multiple creditors looking to open accounts for you is better for your score.
Other factors would be the mix of credit that you have. A better score would show a mix of mortgage, car loan and credit cards over one with all credit cards.
"What can I do to improve my FICO score?" There are several things you can do, below are just a few:
* Pay your bills on time
* Pay off debt, instead of transferring balances
* Check your credit report on a regular basis
* Keep the balances on credit cards low
Remember that your FICO score can also be used to rate you on insurance premiums. Although we may have made credit and financial mistakes in the past, the one good thing about these kinds of mistakes is that over time they can be repaired.
