What Is Your FICO Credit Score, How Is It Calculated And How Does It Affect You?

Obtaining copies of your credit reports from the 3 major credit reporting bureaus is a must do for consumers, especially if they want to establish and maintain a good credit. If you order copies directly from every credit reporting bureau, by law you may obtain yours for free, once per year per bureau. However, with the free yearly credit report, there is one piece of information that is not included and that is your FICO credit score. Your FICO score can determine a number of things. These include the interest rate mortgage lenders will charge you and the rate you will be paying for your credit cards. For only a small fee you can sequence your FICO score and acquire a piece of information that is important for you to you fully understanding and improving your credit rating.

FICO, which stands for Fair Isaac Corporation, is a score that helps determine the interest rate that creditors will charge you.  The higher your score, the lower your interest rate will be which will result in lower mortgage payments and more money for you in the end.  In fact, when you purchase a car, apply for a new cell phone account, or make pretty much any kind of credit application, your FICO credit score is obtained by creditors. 

Your FICO score is determined by five factors.  In regards to the Fair Isaac Corporation, these five factors are all weighted in a different way and each one is assigned a percentage figure based on their importance.  Specifically, these are the 5 factors and the calculated percentages for each: 

1.  Payment History – 35% 

2.  Outstanding Balances – 30% 

3.  Length of Credit History – 15% 

4.  New Credit – 10% 

5.  Types of Credit Used – 10% 

Obviously, if you have made various late payments and owe a big amount of money to your creditors, your FICO score will be much lower than an individual who makes the payments on time, has a manageable level of debt and has a good credit history. 

Together with your credit report, your FICO score can assist you in deciding the plan of attack you will need to take in order to improve your credit standing.  This is an extremely important step to take, particularly if you anticipate making any type of credit application within the next year.  If there are errors in your credit report, then your FICO score will be lower as a consequence.  You have to stay on top of this and make sure that the three credit reporting agencies correct all these errors now.  Then once amended, run your FICO score again to find out if it has been adjusted upwards. 

Remember, the higher your FICO score, the lower your payments each month will be on almost everything you finance through a creditor.  Order your free credit report today and pay a little extra to get a hold of your FICO score.