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All About Your FICO Score

by Brad Stroh

When it comes to credit, your FICO score is what counts. If you're new to the credit or home buying game, FICO is probably a very mysterious and confusing word. You probably already know it has something to do with credit; but do you know exactly what your FICO score is and means? If not, read on.

To put it bluntly, your FICO score is a number that determines the interest rate you'll get on a loan. You can find it at http://www.FICO.com. It is a predictive measure used by lenders to rate the probability that you will default on a loan. The higher your FICO score, the lower your interest rate. There it is; the boiled-down, straight-to-the-point definition of a FICO Score. But, as you probably guessed, there is much more to know about a FICO score and what affects it. For starters, FICO is actually short for Fair Isaac Corporation. Founded in 1956, the Fair Isaac Corporation is the financial institution that developed the FICO credit score. This credit rating is used to measure your credit risk. FICO scores can be obtained through most major consumer reporting agencies in the U.S. Whenever you make a purchase that involves your credit (such as a car, home, boat, etc.), creditors obtain your FICO score; however, your score is not released to you. You can find out your FICO score on your own, but the creditors you partner with to finance personal belongs don't have to provide you with the financial information they find out about you. However, if you're turned down for financing, creditors and lenders are required to provide you with a reason why you were turned down and, if your credit score was a factor, your credit score. They are also required to specify which credit agency they used to establish your credit score.

How to Calculate a FICO Score Your FICO score is calculated based on your payment history, your outstanding balances, length of credit history, any new credit you have, they types of credit you've used, and your credit report. http://www.Bills.com has tools to evaluate how a score is calculated, but in short, it's nearly impossible for you to calculate your own FICO score. Each area of your credit is weighed and used differently in calculating your credit score. However, each area is vital to getting a high FICO score, so you need to be mindful of paying your monthly bills on time and managing your existing credit. Even a few late payments can negatively affect your score.

How to Identify a Good FICO Score Your FICO score is based on a scale of 300 to 850. To determine your risk factor, creditors take your FICO score and compare it to a FICO score chart. If you have a score less than 620, you're considered "Risky". If you have a score between 620 and 660, you're labeled as "Uncertain". A FICO score between 660 and 720 means you have an acceptable credit rating. Anything over 720 means you have "Perfect" credit.

How to Obtain Your Credit Score If you want to check out your FICO credit score, the Fair Credit Reporting Act requires the 3 major reporting agencies (Equifax, Experian and TransUnion) to provide you with a complimentary copy of your credit report once every 12 months, but only if you request it (it will not be automatically sent to you every 12 months). However, each agency will most likely have a different score for you depending on the particular credit information provided to that particular agency. So, if you want a better idea of what your credit score actually is, request your credit score from all three agencies and figure out the average.

Your FICO score says a lot about you. It's used by creditors to establish your credit ranking and determine your interest rate on loans and financing. The higher your FICO score, the lower your interest rate will be. So stay on top of your monthly credit card, mortgage, and even cable bills, and pay everything on time. If not, your credit could plummet.

About the Author

Brad Stroh is currently co-CEO of Freedom Financial Network and Bills.com. If you would like more of Brad's articles, please visit the Bills.com information on Credit.

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