Whether you are seeking a home or car loan, phone service or new credit cards, most creditors look at credit scores, or FICO scores, to determine their risk. Ranging from 300 to 850 points, FICO scores are calculated using a mathematical model that assigns points for different pieces of information that predict the way you will handle credit.
What is FICO? A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Credit scoring began in the late 1950s, and FICO scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrower’s credit history into a single number. Credit scores are calculated by assigning points for different pieces of information that best predict future credit performance.
Lynn continues: Credit scores analyze a borrower’s credit history using factors such as: payment history, including late payments; the length of credit history; the amount of credit owed versus the amount of credit available; new credit established; types of credit used; and negative credit information such as bankruptcies, charge-offs, collections, etc.
Lenders might look at other criteria such as address, salary and employment history, but these factors are not part of the FICO score.
How to improve your FICO Score
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