A FICO score is a number computed by Fair Isaac Corp. indicating how likely you are to pay back debt. It is the most widely used credit score.
FICO credit scores run from 300 (high risk) to 850 (low risk), so the higher your score, the easier it will be for you to get loans with more favorable interest rates. To bump up your credit score you need a broad history of borrowing money and paying it back on time, over time. Lenders pay FICO to get your score, which is based on information from the three major credit reporting agencies: Equifax, Transunion, and Experian.
You can also buy your FICO score, to suss out how your borrowing attempts might go, but make sure you're getting the real thing. There's no set rule that, say, anyone with a 450 credit score won't be able to borrow money. The 300-850 structure is a guideline and borrowers can take into account other information.
In addition to your payment history, FICO takes into account the types of credit you've used, the length of your credit history, and the amounts you owe. The impact of mistakes on the score diminishes over time if you re-establish good repayment habits. Payment history and amount borrowed make up about two-thirds of the FICO score for most borrowers.
Check out www.myfico.com for details.
Related Fool Articles
Recent Mentions on Fool.com
- 5 Ways to Improve Your Financial Life in 2016
- 15 Mortgage Questions and Answers for First-Time Homebuyers
- What Is a Mortgage Broker, and Should You Use One?
- In Case You Missed It, a Dramatic Shift Is Underway in the Credit Markets
- How to Get a Mortgage: 5 Critical Tips
- 5 Ways to Boost Your Credit Score in 2016