FICO: Your Credit Score

In several of our past postings we discussed the importance of having a good credit score. Today we want to remind our readers some basic facts about FICO scores, the number that determines your credit-worthiness:

FICO credit scoring system was developed by Fair, Isaac and Co. It ranges in between 350 to 850. More the better. The score tells lenders how likely you are to pay a credit obligation or repay a loan on time. If you have higher scores, you are likely to get lower interest rates in mortgages and sometimes even in credit cards and you'll be more in a position to demand some favors from your creditors.

The following criteria (in order of importance) determines your score:

1. Payment history (if you pay in time)
2. Total amount currently owed (One important criteria is what percentage of your total credit limit you are using currently. As you approach your limit, your score sinks)
3. Length of credit history (established in USA)
4. New credit application (newly opened accounts lower your score)
5. Types of accounts in Use (whether your mix of credit accounts, i.e. mortgages, installment loans (like car loan) and credit cards, is a healthy one. Having too many accounts of one type goes against you.