If you’ve recently checked your credit score and began repairing your credit then you probably came across your FICO score. Many people ask if a FICO score is the same as your credit score, and if not, what’s the difference.
In today’s article, you’ll learn finance 101 as we teach you everything you need to know about a FICO score and why it is important. Keep reading to get the knowledge you need to stay on top of your credit.
Finance 101: FICO Scores
A FICO score is used by lenders as a factor in loan applications. Other factors like your debt and income are also used in the decision-making process. This helps lenders decide if you will be able to repay them.
Understanding finances requires learning a little bit about FICO scores and other credit reporting services. FICO scores were created by Fair Isaac Corp. almost 25 years ago and are now FICO is a leading credit scoring agency.
Sometimes people use the word credit score and FICO score interchangeably but you should be aware that FICO is just one particular brand of a credit score. FICO scores range from 300 to 850. The higher your score the better your credit.
When taking a look at your personal finance you should aim to have a FICO score of 720 or higher to be considered to have good credit.
FICO scores can help with saving money by getting you better rates on financial products like mortgages, loans, and credit cards. Having a high FICO score is a smart saving technique that all financial advisors recommend.
How Is a FICO Score Calculated?
Unfortunately, FICO doesn’t tell us exactly how their scores are calculated due to proprietary information but there are certain guidelines you can follow to achieve a higher score.
Your on-time payment history is factored into your score. Late payments can make your FICO score decrease. Bankruptcy and accounts that are in collections also decrease your score.
How much debt you have accumulated also plays a role in determining your score. The less debt, the better the score.
How long have you had your line of credit? FICO will assess the average age of your credit lines and use this information as part of your score, so it may be a good idea not to close out your oldest credit card, even if you are not using it anymore.
How Can I Check My Score
Many credit card companies offer access to free FICO credit reports on a monthly basis. Check with your card company first to see if this is a service they offer.
If not, there are many websites online where you can check your score for free. If you want to improve your credit score, staying on top of your FICO score can help you do this. Remember, improving finances takes a while, so check back frequently and keep at it.
Stay on Top of Your Credit
We hope you enjoyed this finance 101 article. Use these tips we discussed to help you find your latest FICO credit score and give your score a boost.
If you enjoyed this article, please check out our other personal finance articles too.
