Borrowing money is fundamental financial activity that allows average consumers to buy homes, cars, education and other goods and services. When you take out a loan or a credit card, lenders use your FICO score (also called your credit score) to help determine how risky it is to lend to you. Your FICO score can impact the interest rate you receive on loans.
FICO Score Range
FICO scores get their name from the Fair Isaac Corporation, which developed formulas used to calculate credit scores. FICO scores range from 300 to 850; 300 is the worst FICO score possible and 850 is the highest score you can have, which is also known as a perfect credit score. Credit scores are based on a variety of credit information, such as the length of your credit history, whether you have made debt payments on time in the past and how much debt you currently hold.
FICO Score Data
A FICO score of 850 is rare. According to the Fair Isaac Corporation, the majority of people have credit scores somewhere between 600 and 800. The MSN Money website states that less than 1 percent of the U.S. population (about 1 million people) actually has a perfect credit scores of 850. According to Bankrate, about 13 percent of American have credit scores of 800 or higher, while about 15 percent have credit scores lower than 600.
Achieving a Perfect Score
Most people never achieve a 850 FICO score, but there are certain steps you can take to increase your score. First, you should always pay your debts on time. Missing a debt payment can quickly derail a good credit score. Keeping your credit card balances as low as possible also tends to boost your credit score. The MSN Money website recommends that you avoid making too many credit card inquiries, because they can hurt your score. A long credit history tends to help credit scores, so your score may rise naturally over time if you are financially responsible.
Considerations
While 850 is the highest FICO score possible, achieving a perfect score is more superficial than practical. Scores in the high 700s and 800s are still considered good scores, and lenders may be willing to give borrowers with scores in the high 700s their lowest interest rates. According to MSN Money, there usually is not much, if any, difference between a perfect credit score and a score in the high 700s when you are seeking a loan.
0 comments:
Post a Comment