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Many people are aware that they have a credit report that is compiled by several major credit bureau and one particularly important element of your credit report is your FICO score. So what is your FICO score and how does it affect your borrowing choices? FICO is an acronym formed from the first letters of the Fair Isaac Corporation who developed this method of credit scoring and it is a number that is generally between 350 and 850 which ranks credit worthiness using the proprietary algorithm invented by the company, with 350 being the worst score and 850 being the best. In spite of the fact that the details of the algorithms are a closely held secret, over the years a lot of people have reverse engineered many of the more important elements. For example, any late payments will lower your score and the greater the number of late payments you have and the later these payments are the more heavily the credit score is reduced. Another factor is the overall amount of debt that you carry each month. A not quite so important factor is the number of credit cards you have and the number of credit checks undertaken out on your account. Any score less than around 620 is considered to be marginal and a score below 580 is decidedly poor. A score of 720 or more is very good to excellent. A score that comes in between 620 and 720 represents something of a gray area where items other than your your FICO score will play a more significant part in any loan decisions. Banks, mortgage companies, credit card issuers and other lenders will use your FICO score as an extremely important element in deciding whether or not to make a loan. They will also take your score into consideration when deciding what interest rate to charge you. Other things being equal the greater your score the better the interest rate you will be charged. Frequently of course all other things are not equal and general interest rates, the current demand for loans, the overall economy and a host of other factors have a significant influence on whether or not lenders will grant loans and at what rate. Another extremely important factor these days is the widespread use of computers which has altered the financial industry significantly over the past 20 years and provided consumers with far more fast and simple access to products an services through the World Wide Web. Even with all these changes the FICO score is still a primary tool for almost all lenders and, while it might not be the determining factor in the final decision, it unquestionably influences the 'first cut' when faced with a stack of applications to approve or disapprove. Luckily for those who have financially slipped there are choices and even if your credit score is not very high you nevertheless have several options. The first thing you ought to do however is to set draw up a plan to raise your FICO score. As you work to clear your outstanding overdue debts by paying them off or negotiating with the creditor your FICO score will gradually increase. And remember that the age of those 30 and 60 day past due and late payments is a factor in calculating your FICO score. At the same time as impoving your FICO score you can also shop around for alternative lenders willing to take a higher risk by lending you money. The downside is that these loans nearly always carry an increased interest rate. If you can your best course of action is to try to go without borrowing for a while while you work to raise your credit score.
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TheDebtAssistanceCenter.com provides information on a range of topics including understanding your credit report score and exists to provide debt assistance for borrowers.
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