FICO scores determine a consumer’s likelihood to pay bills, ranging from 300 to 900. Credit bureaus report scores to FICO, and consumers can improve their scores by paying bills on time and avoiding high credit card balances. Low scores can affect employment and housing opportunities, and consumers should check their credit reports for errors.
A FICO score, sometimes mistakenly referred to as an FICA score, is a numerical score that determines how likely a consumer is to pay their bills. The scores are compiled by a company called Fair Isaac & Co., which began developing credit scores in the late 1950s. Today, lenders and other agencies rely on FICO scores to decide whether a consumer should receive a loan.
FICO scores range from 300 to 900. Scores are listed on a credit report that provides details about credit cards and loans a consumer has had in the past. It takes time to get a strong FICO score, but a good score can deteriorate quickly if the consumer doesn’t make sound financial decisions.
Credit scores are developed by examining various factors. The FICO score takes into account whether the consumer has made any late payments, how long the consumer has lived at a certain address, whether the consumer has ever filed for bankruptcy, and the length of the consumer’s credit history. It also considers the consumer’s employment history.
Three major credit bureaus, TransUnion, Equifax, and Experian, report scores to FICO. Small credit bureau companies also serve local areas. While some lenders use all three credit bureaus to determine creditworthiness, other lenders only use TransUnion.
Consumers can increase their credit scores by paying bills on time and avoiding regular credit applications. Applying for credit cards frequently lowers credit scores, negatively affecting consumer credit. On the other hand, if a consumer does not have a large amount of credit, they may want to apply for more credit. This is because having insufficient credit can negatively affect a consumer’s FICO score. Another way to improve a credit score is to avoid high credit card balances.
Low credit scores can make it difficult to rent apartments or receive low interest rates on a mortgage. They can even influence an employer’s decision not to hire a particular job applicant. For this reason, savvy consumers order copies of their credit reports from all three credit bureaus to verify their credit scores and the accuracy of the information on the credit report.
Any errors that appear in the report should be corrected as quickly as possible. By law, consumers have access to one free credit report every twelve months from the three major credit bureaus. Credit bureau companies can be contacted directly for this information.
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