What Is A Fico Score And Why Is It Important?

What Is A Fico Score And Why Is It Important?

Whether you are buying a house or applying for a job, there will eventually come a time where someone will ask you what your Fico score is. Rather than stare at them with a blank expression, it is important that you not only learn what it is but how it benefits you. A Fico score is another name for a credit score and it truly is one of the most important factors of your life. It helps lenders decide if you are "credit worthy" which means whether or not they should lend you money be it for a house, a car, a loan or more. It also is taken into consideration when you get car insurance, health insurance and even a job. The higher your Fico score, the better and more "worthy" you become for better access to loans and new credit.

Fico scores range between 300 and 850 with the consumers average higher than 700. The higher the score, the more favorably lenders look at you, so it's important to only have positive factors affecting your Fico score. These include an established credit history, revolving credit history such as a credit card in which the minimum payments are made on time, as well as timely paid credit accounts such as a mortgage or car loan. The main factors that negatively affect a Fico score, or what makes the number lower, are delinquent payments on any credit account, a public record such as bankruptcy or tax lien, multiple accounts with high balances and charge offs which is when a credit account has basically given up on you paying and "charged it off."

Your Fico score considers how much you pay on each credit account, how much you owe and how much credit overall that you have. By paying all your current debts on time and maintaining lower balances, your score will remain high and therefore show you as credit worthy which in turn will allow you more credit availability.

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