Low FICO Score? The Sooner You Know the Better
Improving your FICO score can help you get lower interest rates. In fact the FICO score is the most important factor lenders use to anticipate how you will repay a loan. FICO is an acronym for the creators of the score, Fair Isaac Credit Organization. “FICO” has became the popular name for their credit scoring system. FICO scores ranges from 300 to 850, with higher than 725 considered good and lower than 600 considered bad. However, there is no single “cutoff score” used by all lenders. Lenders obtain FICO scores from the three major credit reporting agencies. The best way to maintain a good FICO credit score is to handle your credit responsibly over time.
FICO scores can vary from day to day, but most are fairly stable. Getting your FICO score once a year would be sufficient to stay on top of how you rank. Knowing your score gives you the opportunity to take steps to improve it. It is better to work on improving yourFICO score before you suddenly need to apply for a loan. If you haven’t checked yours lately you can get a copy here.
There are a number of factors that affect your FICO score. These include the length of your credit history, missed or late payments, and credit usage versus credit limits. Public records (ie. bankruptcy) or collections will also impact your score. Many people worry excessively about the impact credit inquiries have on their score. FICO distinguishes between shopping for the best rate on a loan and someone who is an habitual “credit seeker”. This is based on the length of time over which recent inquires have been made.
For your three FICO scores to be determined, each report needs to have at least one account that has been open for six months. When adjudicating credit however, lenders like to see more credit activity over a longer period of time. While most lenders useFICO scores when approving credit, how each lender incorporates that information into the adjudication process will differ.
The only way to realiably improve your FICO score is to simply pay down what you owe, as agreed and on time.
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