By the FICO score we understand the category of credit score that holds a major part of a credit report. This score is used by a lender to understand the eligibility of a borrower to get the loans. As the FICO score clearly shows out the way of the borrower to deal with a loan, it is an important weapon for the blenders to assess the risks associated with providing the loans or extending the loans.
The word FICO stands for Fair Isaac Corporation. Mainly FICO Score’ Using numerical models. The FICO score obtains into different factors in all of these five spots to resolve credit risk like current level of indebtedness, payment history, length of credit history and types of credit used and new credit. A public FICO score will array among on 300 to 850. If a FICO score over 650, then it pointed out that the person has a fine credit history. If the scores are below 620, then it will tricky to obtain financing at a positive rate.
Credit score vs. credit report:
A credit score and a credit report are assumed as similar, but that is a wrong concept. Both are different from each other. A credit score is the main thing that forms a credit report. The credit report provides the detail of your total credit history. The report contains information on different type of financial record of the borrower. For example, it contains Payment history, existing credit accounts, Credit utilization, Credit inquiries, and Bankruptcy. It is simply a report of your past and recent credit history. Mainly most credit history will only go back for 7 years as a bankruptcy will stay on your report for 10 years. So you are entitled to total free credit report in each year. It is a good idea to check the report annually to make sure that it is correct.
What makes up a credit score?
A credit score is formed by the records of credit report. Not all records create a high impact on credit score, but some have heavy influences. A FICO score is formed by different contents of credit report. They are; some total of the debt– 30%, New Credit – 10%, Payment History – 35% time of holding up a Credit History – 15%, forms of Credit in Use – 10%. You can see that the bulk of a credit score comes from how much debt actually have and payment history. These two items account for 65% of your score. If you are looking to improve your credit score, then these are the areas that you need to tackle first.
Important of FICO credit score:
FICO credit score is very important for us. With this, we have determined about the value of credit score. A good credit score will be beneficial for your entire life. If you want to borrow money, then the personal loans no credit check lender is going to look at your credit score. If you need to buy a car, looking for a mortgage, then lender will check your credit score.
Jastin Bailey is financial writer. He is passionate about blogging. He works at Loan Company. Click here to more about FICO score.
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