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What Is A FICO Score?

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Your FICO score or credit score as it's commonly called is a very important calculation that can control whether or not you are eligible to receive credit and if eligible the terms you can receive credit under. Failure to understand the impact this score can have on you future purchasing power and lifestyle can be disastrous. This article will break down all the information you need to know regarding your FICO score.

As I mentioned above the FICO score is a numerical score that is based on your financial history as collected in your credit report. Creditors can use this number to evaluate whether or not you are able to pay a loan back on time. The higher the score the more likely you are to pay off a loan on time and the less of a credit risk you pose.

The FICO or credit score ranges are broken down as follows:

720-850 - This represent the best score range

700-719 ? Able to obtain favorable financing terms

675-699- This is still a decent score range

620-674 ? May have trouble obtaining favorable credit terms

560-619 ? May have trouble obtaining credit

500-559 ? Time to improve your score

Your credit score is broken down into 5 distinct categories each with their own importance based on a percentile. The 5 categories and the percentage they represent I relation to your credit score are as follows:

Payment History ? 35%

Amounts Owed ? 30%

Length of Credit History ? 15%

New Credit ? 10%

Types of Credit Used ? 10%

Your payment history contains information on credit cards, retail accounts, installment loans, finance company accounts and any mortgages you may have had. It also details any past due accounts and the amount owed on hem. You will also find bankruptcy information as well as other adverse information in regards to your credit history. This is why it warrants a 35% piece of the pie.

Your amount owed is generally speaking the amount owed on any accounts you currently have and number of accounts with balances. Note that it has a large impact (30%) on your credit score. The length of your credit history details when accounts were opened and the last activity on those accounts. New credit shows the number of recently opened accounts by the type of account and number of account inquiries. Finally the type of credit used is a snapshot of what types of financing you have held.

Other information that is included in your credit report but has no bearing on your FICO score includes your race, age, where you live and your sex and employment information. Although the FICO score doesn't use these factors the employment information may be used by other companies and creditors to help in their decision making process.

There are three major credit-reporting agencies - Equifax, Experian and TransUnion that have your credit information on hand. Each of these credit bureaus maintains their information separately, which can cause the financial data to be slightly different among the three of them. Most experts agree that in order to get the best snapshot of your financial history and credit worthiness it is a good idea to request a report from each of the reporting agencies. It is also highly recommended that you actually review your credit report once a year in order to identify and correct any errors before they cause any future potential problems when you apply for credit. Recent changes in the laws no allow for consumers to request 1 free credit report each year in order to look for any such errors.

Here is the contact information for each of the three reporting credit bureaus:

Equifax: (800) 685-1111,
Experian: (888) 397-3742,
TransUnion: (800) 888-4213,

As you can see your FICO Score is a very important number that represents your financial trustworthiness in the eyes of creditors. Failure to properly monitor it could cause you future headaches when it comes time to apply for any form of credit.

Timothy Gorman is a successful Webmaster and publisher of He provides more debt relief, consolidation and credit repair information that you can research in your pajamas on his website.

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