If you’ve looked up your credit score, the odds are good that you saw the term FICO. However, you may not have understood this term or how it applies to your credit. It’s essential to comprehend a FICO score, as it informs your buying (lending) power, among other concerns.
Given the impact of FICO scores, one should strive to understand as much as possible about them. Here are the basics you should know about FICO scores.
What is a FICO Score?
Your credit score is a three-digit number used by lenders to determine if you’re likely to pay off a loan. It helps them set the amount of money you can borrow and the length of time that you have to pay it off.
Your FICO score is a summary of your credit history that measures various factors, such as your credit utilization and length of credit. It can also help you understand how well you’re managing your finances.
FICO Score Ranges
The range of credit scores is between 300 to 850. Generally, people with a score of 670 to 739 will be considered “good” by lenders. Meanwhile, those with lower ranges will find it hard to get approved for a loan. Although a borrower’s score is considered, other factors such as income and credit utilization are also considered to determine their creditworthiness.
Why Do FICO Scores Matter?
Individuals with good credit scores can get various credit products and services, such as loans, insurance, and medical expenses. Some utility and insurance companies will check your score when setting up their service terms. A good score can also help you lower your interest rates and minimize the risk of late payments.
How to Access FICO Scores?
Most primary credit providers will offer FICO Scores. Alternatively, one can have any credit monitoring service provide their score. This is typically a complementary service for paid credit monitoring service users.
How to Improve a FICO Score?
A good credit score can be achieved by maintaining a perfect payment history and having various credit accounts. However, it’s also important to remember that a high credit utilization ratio can negatively affect one’s credit rating. In other words, you don’t want to use up all of your available credit constantly.
Getting behind on your credit card payments and applying for new credit are some factors that can lower a person’s score. Having a good score can also help you avoid getting into credit card debt. Having a good credit monitoring service can help keep your information secure.