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What Is A FICO Score?
A credit score is most commonly known as a FICO score. FICO
stands for Fair Isaacs Corporation. It's a company that developed
the credit scoring software used to evaluate your credit
worthiness.
Most lenders use the FICO score to determine whether they
should extend to you a mortgage, car loan, credit cards and any
other type of credit. The higher your score, the more credit
worthy you are. Lenders will know that more than likely, you pay
your bills on time. The lower your score, the more risk the
lender takes on, guessing that you might not pay the loan on
time.
The FICO score ranges from 300 to 850. More than likely,
you'll end up paying a larger monthly payment on your mortgage if
your score is below 650. Your credit score, according to
MyFico.com, is
determined by:
- Payment history-35%
- Amounts owed-30%
- Length of credit history-15%
- New credit-10%
- And types of credit in use-10%
If you don't have any credit, your credit score can be lower
than someone who has had a credit history for several years. When
you personally check your credit often, this will not affect your
credit score. When existing creditors review your credit, these
inquiries are not counted in your score.
Since payment history is 35% of your score, you want to make
sure you don't have a history of late payments on your credit
report. The longer your credit history, the better. Having too
many new credit accounts open can affect your score
negatively.
The bottom line is that a higher FICO score means you are more
credit worthy to potential lenders. The lower your score, the
greater a risk you are to lenders and therefore, your monthly
payments might be higher.
Michelle Roebuck provides mortgage and home buying advice for
people with bad credit at http://www.find-bad-credit-mortgage-loans.com.
Sign up for her newsletter at http://www.find-bad-credit-mortgage-loans.com/newsletter.html.
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