FICO Score 101 - what does your FICO score mean to you

by Sharon Listner

FICO stands for "Fair Issac Corporation," the company that invented the FICO scoring system. Your FICO score is a number generated by one of the three Credit Report Agencies (Equifax, TransUnion or Experian) based on your credit history. This number helps lenders to predict how likely you are to pay your loans on time in the future. A FICO score will range between 300 to 850. The higher your score, the less risk you represent to a lender. Generally, FICO scores below 600 indicate a higher risk to creditors and could cause a lender to charge you a much higher interest rate or turn you down for a loan. According to the Fair Issacs Corporation, approximately 14% of credit worthiness Americans have a FICO score of below 600. This example illustrates how a FICO score can affect "real" life experiences.

Bob has a FICO score of 600 and applies for a home mortgage loan. Mary also applies for a home mortgage loan and has a FICO score of 720. According to the Fair Issacs corporation, Bob would likely get an interest rate of 8.531%, while Mary would get an interest rate of 5.702%. On a $300,000 mortgage loan, Bob's monthly payment (principal and interest) would be $2,313 while Mary's monthly mortgage would be $1,742 - a whooping difference of $571. I don't about you but I could surely use an extra $571 in my bank account at the end of the month.

What goes into my FICO Score?

Payment History - 35% of score.
* Did you pay your bills on time?
* Does your file reflect a bankruptcy, lien, wage garnishment, collections, delinquent accounts?
* How many past due/delinquent accounts do you have?
* How severe is the delinquency (30, 60, 90 days... past due)?
* How long has it been since the accounts were delinquent?

Amount owed - 30% of score.
* How much is owed on your accounts?
* How many of your credit lines are being used?

Length of Credit History - 15% of score.
* How long have your accounts been opened?
* How active are the accounts?

New Credit - 10% of score.
* What new accounts have been opened and what types are they?
* How many recent inquiries have been made against your credit?
* Is there evidence of re-establishment of positive credit?

Type of Credit - 20% of score.
* What is the number of the various accounts (major credit cards, retail cards, mortgage, equity lines of credit, etc)

What does NOT go into your FICO Score?
* Race, color, religion, national origin, sex, marital status
* Age
* Salary, occupation, title, employer, date employed
* Place of residence
* Requests that you have made for your credit report, pre-approvals, employer inquiries
* Whether or not you are participating in credit counseling.

The author is the owner of the information-rich website www.poorcreditgenie.com. The website offers free advice on how to rebuild credit and manage debt. The site also features numerous articles and news stories on credit report, credit cards and bankruptcy.

About the Author

Sharon Listner writes about debt management. Visit the information-rich website www.poorcreditgenie.com. The website offers free advice on how to rebuild credit and manage debt. The site also features numerous articles and news stories on credit report, credit cards and bankruptcy.

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	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.