A FICO Score Of 720 Or More Is Considered To Be Very Good To Excellent

Category: Finance.

Most of us are aware that we have a credit report which is compiled by a number of major credit bureau and a particularly important part of your credit report is your FICO score. FICO is formed from the initial letters of the Fair Isaac Corporation who created this method of credit scoring and it is a number which is normally between 350 and 850 which ranks your credit worthiness using the proprietary algorithm devised by the company, with 350 being the worst score and 850 being the best.

But what is your FICO score and just does it affect your debt management choices? Although the algorithms are a tightly held secret, over the years a lot of people have be able to word out many of the important elements. The total amount of debt which you carry each month is yet another element. For instance, late payments will lower your score and the greater the number of late payments you have and the later those payments are the more heavily your score will be affected. A not quite so important factor is the number of credit cards you hold and the number of credit checks carried out out on your account. A FICO score of 720 or more is considered to be very good to excellent. Any FICO score of below about 620 is considered marginal and a FICO score of less than 580 is poor.

A FICO score which falls between 620 and 720 represents something of a gray area in which items other than your merely your FICO score will play a more significant role in loan decisions. Lenders will also take your FICO score into account when deciding what interest rate to charge you. Banks, credit card companies, mortgage lenders and others will look at your FICO score as a very important element in deciding whether or not to make a loan. All other things being equal the higher your score the lower the interest rate you will have to pay. Yet another very important factor noe is the widespread use of computers which has changed the financial industry significantly over the past 20 years and provided consumers with far more easy and fast access to services and products using the World Wide Web. Often of course everything thing else is not equal and prevailing interest rates in general, the overall demand for loans, the overall economy and other factors will have a significant influence on whether or not lenders will grant loans and at what rate. In spite of all these changes your FICO score remains a primary tool for almost all lenders and, though it may not determine the final decision, it unquestionably influences the first cut when faced with a pile of applications to approve or disapprove.

The first thing you ought to do is to set devise a plan to raise your FICO score. Happily for those who are having some financial problems there are choices and even if your credit score is low you nonetheless will have several options open to you. As you slowly eliminate your outstanding overdue debts by paying them off or negotiating with your lender your FICO score will slowly increase. While you are improving your credit score you can also shop around for lenders willing to take a higher risk and lend you money. And do not forget that the age of those 30 and 60 day past due and late payments is a factor in working out your FICO score. The problem of course is these loans almost always carry a higher interest rate.

If possible your best course of action is to try to go without borrowing for as long as possible while you work to raise your credit score.

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This guide has been prepared by the Zetland Financial Group Limited and is intended for the information of clients or prospective clients.