Your credit score is your key to loans, leases and other life necessities. In most cases, you need a credit rating of "fair" or better to secure a loan. A "fair" FICO score is 650.
FICO Scoring
The Fair Isaac Corporation credit score is determined based on a person's history of defaulting on payments, her current debt-to-credit ratio, the type of debt (student loans versus credit card charges) and the length of her credit history.
History of "Good" FICO Scores
The number of a "good" credit score has gone up in the past few years. A 2010 real estate guide on BankRate.com now estimates that any FICO score below 740 may be subject to increased interest rates.
How to Improve Your FICO score
There are many ways to bump your FICO score, including having a stable job (one where you've been employed for at least two years), good credit, and lowering your debt-to-income ratio and debt-to-credit ratio. You should also contact your credit agency and check your reports for inaccuracies, omissions, inconsistencies and other errors.
Breakdown of Your FICO score
FICO scores are broken into five parts: payment history (about 35 percent of your score), how much you owe (30 percent), length of credit history (15 percent), new credit (10 percent), and other minor factors (10 percent). Under the Equal Credit Opportunity Act, your credit score does NOT have anything to do with your race, age, nation of origin, religion, color, welfare status, sex or marital status.
Credit Reports and FICO Score
You can get a free credit report from each of the three credit reporting agencies (Equifax, Experian, and Transunion) every year, but the free report does not include your FICO score. You can pay to find out your FICO credit score by visiting myFICO.com. If you apply for a mortgage or home equity loan, you can access your credit score for free.
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