Credit Score : FICO score

Who cares about your credit? You might be surprised. Get the lowdown on your credit and how to improve your lot in the lending world.

Credit score is a three-digit credit rating that represents an estimate of an individual's financial creditworthiness as calculated by a statistical model. A credit score attempts to quantify the likelihood that a prospective borrower will fail to repay a loan or other credit obligation satisfactorily over a specified period of time.



A credit score is typically based on the information in an individual's credit report. Lenders such as banks and credit card companies use credit scores to manage the risk posed by lending money to consumers. Examples of such uses include determining who qualifies for a loan, assigning an interest rate, assigning credit limits, and managing accounts. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.



What is a good or bad credit score?

In general, a score of 720 or above is considered a very good credit score. However, there is no single "cutoff" score used by all companies, and there are many additional factors besides your credit score that companies use to determine your credit risk and corresponding interest rate or down payment.

Did you know a winning credit score could potentially...Lower your interest rates, Get you instant loan approvals and reduce or eliminate required down payments. The higher your FICO score, the lower your payments

Credit Score

Credit Score : 720 and up

People with scores of 720 or higher will have a good chance of obtaining loans at the best interest rates. These loans may require less documentation and paperwork, and potentially less or no down payment or collateral.

Credit Score : 680-720

The average person has credit scores in this range and will usually not be able to negotiate the best terms.

Credit Score : 620-680

Persons with these credit scores will usually fall under “standard” company rules and have less flexibility in choosing the better loans or services.

Credit Score : 580-620

These people will be reviewed by companies with a critical eye and will need compensating factors to be approved for most loans or services.

Credit Score : Under 580

A person whose credit score is in this range will typically be required to provide a substantial down payment/collateral and/or pay a higher interest rate.

Credit Score Range 350 to 950

Varies by the scoring companies ... example FICO score range is 300 to 850; Experian FICO scoring scale is roughly 400 to 900; Equifax Scores range from 350 to 950; Fannie Mae range from approximately 300 to 900

Each credit bureau has its own unique system for compiling credit scores. However, the scoring models have been normalized so that a numerical score at one bureau is the equivalent of the same numerical score at another. Thus, a score of 700 from Equifax indicates the same creditworthiness as a score of 700 from Trans Union or Experian, even though the calculations used to determine those scores are different at each bureau.

Under mortgage lending guidelines
  • A score of 650 or above indicates a very good credit history
  • Scores between 620 and 650
  • Lenders will look for any particular credit risks before extending a large loan or high credit limit.
  • A score below 620 may prevent a borrower from getting the best interest rates

Credit scoring is a system creditors use to help determine whether to give you credit.
Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

FICO score

FICO is an acronym for Fair Isaac Corporation (traded publicly under the symbol FIC) and often refers to the best-known credit score in the United States which is calculated using mathematical formulae developed by FIC.

The three major credit reporting agencies in the United States, (Equifax, Experian and Trans Union) calculate their own FICO scores, which go by different trademark names as well as many different versions of the score.

Experian Fair Isaac Risk Score, FICO Score, ScoreX
Transunion Empirica Empirica Auto 95 Precision Score and Precision 03
Equifax Beacon, Beacon 96 and the Pinnacle

Ways to Improve Your Credit Score

Review your credit report for any errors and correct glitches that may not be accurate (but are still hurting your current score). You will get a free copy of your credit report with your free credit score

Refrain from opening a lot of new accounts over a short period of time, especially if your credit history is on the shorter side to begin with

Pay your bills on time



Don't open any credit lines you probably won't use. For example, don't open a lot of store credit cards just to get the initial 10 percent discount

Instead of moving credit card balances to lower rate cards, try to pay them off. Transferring balances can change the ratio of your total credit card balances to your total available credit lines, hurting your credit score

Open a few new credit accounts, use them responsibly, and make your payments on time

Try to use your credit cards less. Even better, pay them off every month. The bigger the space between your total credit limits and the balance you carry, the better. Try to keep your balance below 25 percent (for example, $2,500 if your credit limit is $10,000)

Contrary to what you may have heard, don't close old, paid-off accounts. Credit companies used to advise people to close old credit cards they were no longer using. But closing these cards shortens your credit report and makes you seem less credit-worthy

Avoid bankruptcy. Declaring bankruptcy is one of the worst things you can do for your credit score. It may seem like the easy way out in the short term, but over time it will cost you tons in the way of high interest rates

Credit Analysis of your Credit Score Report

Positive factors influence your credit score.

Here are the top factors that make your score higher:

Payment history

When you pay 100% of your accounts on time...your score goes higher. Missing payments is a negative factor. Some cases are worse than others. If you have not missed any payment recently, lenders may think you are, or have become, responsible and do not, or will no longer, miss payments. Lenders realize that many people occasionally miss a payment or pay late. Therefore, missing payments on one account may not be as harmful as missing payments on many. Similarly, missing a single payment may not be as harmful as missing several consecutive payments. Note that many lenders consider missing 3 or more consecutive payments to be an indication that you may never repay them. Finally, it may not be as harmful to miss payments on accounts with low balances as it is on accounts with high balances, because lenders stand to lose less money if they remain unpaid.

Credit accounts

Having accounts listed in your credit reports is a positive factor because the account's payment history shows lenders how you pay your bills. However, having too many accounts may be considered a negative factor because lenders worry that you are spending (or preparing to spend) beyond your means, even if you have never missed payments. Also, if you do not currently have credit, getting your first few credit cards may be difficult and may involve high fees, high interest rates, and low credit limits. Note that finance trades (such as debt consolidation accounts) are often associated with troubled credit, and may therefore be considered a negative factor.
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