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What's in a FICO Score ?
Generally when lenders or creditors talk about "your score," they are usually referring to the FICOŽ score developed by Fair Isaac Corporation. It is the most commonly used scoring system to determine credit worthiness of an individual. FICO scores range from 300-850, and most people score in the 600s and 700s (higher FICO scores are better). Lenders buy your FICO score from three national credit reporting agencies (also called credit bureaus): Experian, Transunion & Equifax.
According to most lenders, FICO credit scores above 700 are very good and a sign of good financial health. FICO scores below usually 600 indicate high risk to lenders and can lead lenders to charge you much higher rates or turn down your credit application. The generally accepted average FICO Score in the US is between 650 - 680 . Most people lack knowledge about their credit scores, it is arguably one of the single most influential number in their lives. According to a poll done by the Consumer Federation of America and Fair Isaac Corp., the company that created the most widely used credit score formula called FICO, almost 1/2 of credit consumers do not know or understand that the credit score is an assessment of your overall credit risk.
And many more people have no idea what factors go into determining your overall FICO Score.
This category includes payment history information about several different types of accounts such as credit cards, retail accounts and installment loans. Many factors are considered including number of past due items on file, amount past due on delinquent accounts or collection items and severity of delinquency (how long past due).
The FICO scoring model weighs capacity heavily because it knows that the majority of Americans who go bankrupt charge up their cards to the limits before they file.2 The FICO model considers three separate components of an individual's credit when assigning capacity points: 3) Length of Credit History: 15% Even if a member no longer wants an older account, he or she should think twice about closing it. Lenders are looking for borrowers with long credit histories. Also, members with new credit should be cautious about opening many accounts. Rapid account buildup may look risky because of uncertainty in handling the credit .1 Hard inquiries, or requests from creditors for a copy of a report, are tracked on the credit report for 24 months. But, only the inquiries from the most recent 12 months are included in the FICO score calculation. If a member would like to opt out of pre-approved credit offers, they may do so at www.optoutprescreen.com.3 4) Types of Credit: 10%,br> This category looks at the overall mix of credit such as credit cards, mortgages or consumer finance accounts. Members should try to balance the mix but are advised not to open new credit accounts for balancing purposes unless necessary. It is unlikely that adding accounts will improve their credit scores.
5) New Credit: 10%
2. Length of accounts 3. Recent requests for credit report 4. Length of time since credit report inquiries were made by potential lenders What things WILL NOT hurt your FICO Score?
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