All About FICO

A FICO score is a credit score representing your credit history. It is a numeric score ranging from about 300 to 850. The median score in the U.S. is approximately 725. A FICO score above 720 is deemed to be "good credit" while a score under 600 is considered poor. Your FICO score is important for a number of reasons, one of which is that this score will be sent to lenders by credit reporting companies. Lenders review this information to determine whether or not you would be a good candidate for a home loan. It helps them to predict if you are likely to be able to repay the mortgage according to the terms of the loan. FICO is an acronym for Fair Isaac Corporation, who created the mathematical formula used to find this credit score. There are three other similar variations on this score used by other credit reporting agencies. Beacon by Equifax, Empirica by Trans Union, and Fair Isaac Risk Score at Experian. All of these scores are developed by Fair Isaac Corp., but are slightly different. Fair Isaac also offers modified versions of their FICO score, two of which are the "Classic" FICO and the "Next Gen" FICO. The factors that Fair Isaac takes into account when calculating your FICO score include (in order of weight) the punctuality of your payments in the past, capacity used, length of credit history, types of credit used, and any recent search for additional credit or recently obtained credit. Capacity used refers to the ratio of current revolving debt (credit card balances) to total available revolving credit (credit limits). You can view your own FICO scores online at sites such as http://www.myfico.com for a charge of about $45 to see scores from all three major agencies. Lenders will pay less than this to obtain the same information. A low FICO score can either prevent you from getting credit or can get you credit at a higher rate of interest. If you want to improve your credit score you have a variety of options available to you. Credit counseling organizations are oftentimes free of charge and offer legal and helpful advice on how to better manage your money and debt. The harder road to take would be to improve your FICO score by taking the logical and necessary steps towards that end. This might include checking your credit history for accuracy (you can get a free credit report once a year at http://www.annualcreditreport.com), paying your bills on time, and decreasing your credit capacity. Lenders will also take a look at your income, the appraised value of your home, and any other debt obligations you currently have to determine if you are a good candidate for a loan. Mortgage