What is FICO?
FICO stands for Fair Isaac Corporation regarded as the best and most generally used credit report model in the U.S. FICO scores are primarily based on a shopper’s credit info and are what banks and other lending establishments use to base their lending decisions on. If you need a low interest rate on a new loan, a high loan amount and very little collateral or security, then you need a good FICO score.
Tracking Payments
The most important part of your FICO score (35%) depends on your payment history so if you pay your balances on time you will have a better credit history. Delinquent payments can negatively impact your score, and late payments and collections have a major negative result on your score. Delinquency and collections stay on record for seven years, so consider carefully before filing for bankruptcy since it’ll completely obliterate your score.
Debt Not Paid
The next largest chunk to determining your score is outstanding debt. Percentage owed on car loans and mortgages and the number of credit cards and the top their limits can lower your score. For credit cards, the rule of thumb is to keep your card balances at 25 percent or less of their limits.
Credit History
The longer you’ve had credit cards open and good standing the better it looks on your record, so don’t close your oldest accounts. 15% of your FICO score relies on your credit score. On a side note, don’t forget to not open more credit card accounts than you actually need.
Credit Inquiries and Types of Credit
Several credit inquires within a short period can have a damaging effect on your score. On the other hand, having many varieties of credit accounts in good standing can increase your score. It helps your credit to have plenty of installment loans like an auto loans and a mortgage open with some credit card accounts all paid on time each month.
