FICO scores: Essential things you need to know
FICO score is a widely used brand of credit scoring created by Fair Isaac Corporation, a data analytics firm based in San Jose, California. It’s common among lenders to examine your FICO score to gauge your credit risk and find out whether you’re worthy of a loan extension.
An evaluator obtains your Fico score by looking into your credit information. This includes your history of credit payments, how long you’ve had credit, the credit amounts you owe, types of credit used, and your latest credit accounts.
A level of importance is assigned to each of these five categories. Your credit payment history has the largest percentage attached to it (35%). The second most crucial factor is your current indebtedness (30%), which is followed by your credit mix (10%), duration of credit history (10%), and new credit (10%).
Based on this credit scoring, your FICO score will get dragged down if your credit profile contains too many late payments. On the other hand, you’ll obtain a positive FICO rating if you have a good history of credit payments.
Your FICO rating can affect the loan amount, interest rate, and repayment terms of your loan. So, you must have a good credit record to avoid any problems borrowing money from lenders. If you know that your credit profile contains too much negative information, it’s time you work on it to get a passing FICO score.
Now, what score should you get to pass the FICO credit assessment? Well, if you obtain a score of 650 and higher, it means that you’re likely to get approved in your loan application. On the other hand, having a score below 620 can mean that you’ll have a hard time obtaining a loan.
For more information regarding FICO scores, check out this infographic prepared by Siloans for that purpose.