22 Mar What Is a FICO Score?
You know you have a credit score, and you’re doing everything you can to keep it in a good shape. And then someone is asking you how’s your FICO score going. Wait, what is FICO score, and what do I need to know it? Baby Boomers Financial is here to answer your question. We’ll share with you the definition of FICO score, little bit about its history, its use, and the main five factors that contains. Check them out!
What is a FICO Score?
FICO or better Fair, Isaac and Company is a company, currently focused on credit score services, and solutions, founded in 1956. Their FICO score has been widely used in the 50’s and few years later it became the favorite score of lenders in America. Till the date, it’s the leading score for the majority of every lending decision. Yes, you understand right, it’s nothing more than your credit score with a brand on it, but highly used and trusted from most lenders. But there is an actual difference in it, and it’s about the variety of industry specific scores and different types of credit.
Five Weighted Factors of FICO Score
It’s determined by these five important factors:
Payment History Makes Up the 35%
The most important element, is of course your payment history, which is the primary use of a credit score, anyway. Here are all your credit cards and accounts, as well as installment loans like mortgages, car loans, etc. The healthier your payment history is, the better your score is, and even better your benefits.
Amounts Owed Equal for 30%
Credit utilization, shows your overall borrowed amount. It’s an important element for creditors and lenders. That’s because they take seriously whether you reach or exceed your credit limit or not. Both cases raise an orange flag of potential risk, that you’re not making enough.
Length of Credit History Takes the 15%
You think that having less credit accounts, automatically qualifies you for a good credit score, and this is partially true. Someone with several credit accounts throughout the years, will have a better score than someone with short credit history.
New Credit Accounts for 10%
Here are all your recent credit applications. If creditors will see frequent applications for new credit accounts, then they will consider you as a risk for their money.
Credit Mix Counts 10% of FICO Score
It’s about the different types of credit accounts that you have. The bigger the variety, the better your FICO score is.
Knowing what makes up a FICO score, and how to properly read your credit report, can help you to understand the impact of your financial decisions. Need some professional help to handle your credit score? Baby Boomers Financial has both the knowledge and experience, for effective credit repair. Don’t hesitate to contact us!