FICO Credit Score
When you apply for a credit — whether for a credit card, a car loan, or a home mortgage — lenders will want to check your credit score first in order to find out what risk they would have to take by loaning you the money.
Often, this credit score that lenders talk about is the FICO credit score. FICO stands for Fair Isaacs Corp., a private company that came up with the first system to assign value to your credit rating based on information found in your credit report. Such information includes (but not always limited to) the following:
* Payment history
* Amounts owed
* Length of credit history
* New credit
* Types of credit used
All in all, you have three FICO credit scores — one from each major credit bureau: Equifax, Experian, and TransUnion. These three bureaus are the ones responsible for keeping records of your credit. The information is embodied in a document called a “credit report” where your FICO credit score is based upon. Thus, when any change occurs in your credit, rest assured that this change will also affect your credit score.
Your three FICO credit scores will affect your chances of getting approved for a loan. It will also affect the loan terms that the lender will offer you. So, therefore, if you have low FICO credit scores, the lender could deny you a loan or approve you but for a higher interest rate than that of someone with a good FICO score.
For this reason, it is important to maintain good FICO scores or take steps to improve them:
Review your current FICO credit scores and credit reports.
You need to know where you stand before you start tackling the problem. So get copies of your FICO credit scores and credit reports from any of the three bureaus. Note that you may have to pay a small fee for this. However, if you make your request at the AnnualCreditReport.com, you can get a free copy of all three credit reports once every 12 months, as mandated by the Fair Credit Reporting Act (FCRA).
Look for errors and report them, if any.
Sometimes, the reason your FICO credit scores are low may be because of some inaccuracies or errors in your credit report. You may have missed one bill payment because you moved without informing your credit card company first about your new address. Or, someone may have fraudulently opened an account under your name.
If you find any such errors in your credit report, be sure to report it immediately to the credit bureau that released it so they can investigate on the matter and repair your FICO credit scores.
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When you apply for a credit — whether for a credit card, a car loan, or a home mortgage — lenders will want to check your credit score first in order to find out what risk they would have to take by loaning you the money. Often, this credit score that lenders talk about is the FICO credit score. FICO stands for Fair Isaacs Corp., a private company that came up with the first system to assign val…
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