Custom Search
|
|
Fico Credit Score - Overview
The score is used by creditors to determine the credit worthiness (or risk) of a person. A low score means the individual is a high credit risk, while a high score means the person is a low risk. The three largest credit bureaus (Equifax, Experian, and TransUnion) all use the FICO score, often labeling it with their own name. The FICO score consists of five main categories. Each is mentioned below with a brief explanation. A more in depth explanation should be widely available via the internet. Payment History The payment history makes up 35% of the FICO credit score. This is why paying bills on time is so important. Paying bills habitually late or not paying at all will severely hurt one’s score. Debt Owed Debt owed accounts for 30% of the credit score and covers a wide range of items. Types of debt (credit cards, mortgages, etc.), the balances of those debts, and the number of open credit accounts all factor in. Having high credit limits with low balances or five years left to pay on a 30 year mortgage will help raise the credit score. Having too many credit cards or owing near the limit of the cards will lower the score. Credit History Age The age of the accounts represent 15% of the score. Having older accounts will help raise the score. New Credit The number of new accounts recently opened account for 10% of the FICO score. If several accounts were opened within the last few months, the score will probably drop. This is due to concerns that the new payments will not be made or will be late. Over time, if the payments are made on time, the positive will balance out the initial negative from opening the accounts. Credit Types The types of credit factor in at 10%. If someone has five credit accounts and all are credit cards, they will probably have a lower credit score than someone that has 2 credit cards, two student loans, and 1 mortgage. Student loans and mortgages are usually considered good debt, while vehicle loans and credit cards are not. Article Directory: http://www.articledashboard.com Provided by Free Annual Credit Report and Scores |
|