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Five Things To Expect When Attending Fico Score | fico score

A FICO score is a numerical number that gives an accurate comparative analysis of a person's creditworthiness according to a credit history report. It is an extremely inexpensive option to other types of consumer finance underwriting. Many financial institutions use the FICO score to make lending decisions. As such, understanding the importance of a good FICO score goes beyond understanding the details of how the scores are calculated.

Generally speaking, FICO credit scores are considered relatively accurate because they take into account such factors as payment history. The accounts owed and length of time accounts have been outstanding or late for provide information about the person's financial capacity. These factors, in combination with other publicly available information about an individual, produce an accurate reflection of a person's actual credit worthiness. An account has three periods in which it should be paid in full. If an account is not paid in full during the designated period, the subsequent periods become “credit-free” periods.

Although it may seem that the length of time an account has been outstanding is the most important factor that producers of FICO scores consider, it is not. Length of time is only one factor among many that are considered. Complete payment history is, of course, the second most important factor. What is equally important is whether or not payments were made on time during the period when an account was open. The third most important factor, while accounting for a small percentage of the overall score, is also one that is easily measured.

FICO scoring has become the widely used consumer credit scores across the nation. Its widespread use has led to the widely accepted and trusted FICO number, which can be seen on credit applications and in bank checks and credit card statements. While most people have heard of FICO scores, many do not understand how they are determined. To better explain how FICO scoring works, it is helpful to first familiarize oneself with the other factors that are used to derive FICO scores.

The primary factors that are used in the determination of FICO scores are the repayment history of the individual. A person's history of on-time credit payments is used as a means of measuring the creditworthiness of that person. The length of time the accounts were opened and the amount owed on them are other factors that are used to create FICO scores. An extension of this method is also used to generate ARM, or Average Restore Score, which is used by mortgage lenders to evaluate an applicant's ability to repay loan debt.

A FICO score that is high can indicate a borrower to be able to pay his or her bills on time. Conversely, a low FICO score can signify that the borrower has made a lot of late payments or has been in bankruptcy. Borrowers who have been turned down for loans are often those who have low FICO scores. The use of the number of lines of credit available, as well as the outstanding balance on each account, is used by lenders to evaluate the borrower's creditworthiness. A borrower with a large amount of available credit, but a low credit score, may still qualify for financing, whereas the same borrower would not qualify if he or she had a small amount of available credit and a high FICO score.

Another factor that lenders use to determine the credit worthiness of a borrower is the amount of credit cards that person has. Credit cards are very common among borrowers because they offer such amenities as bonuses and frequent charges. Credit cards often carry a high interest rate and as such, if a borrower has a large amount of credit cards, such as ten or twenty, he or she will have a lower FICO score.

Finally, lenders use borrowers scores to calculate their interest rates and the amount they are willing to lend to borrowers. If a borrower has a higher FICO score, he or she will be able to borrow more money at favorable interest rates than a person with a lower score. Lenders will use the FICO score of a person before applying any type of loan. Thus, it is very important that borrowers keep track of their FICO scores and make sure that they are on the rise. This will ensure that they do not fall into traps that could cost them their homes or other valuable possessions.

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