Friday, April 17, 2009

FICO Credit Score; How does it work ?

How does Fico credit score works ?

When any one gives you a credit or a credit card they looked at a parameter or a score card and its called Fico credit score. It is an indication of your credit risk at a particular point in time. In other words, it is calculated on the basis of the latest gist of information enclosed in your credit report when the score is requested. When your fico credit score is high, that means you are a low risk to them.

Fair Isaac Corporation computes the mathematical formula which arrives to your fico credit score. People who have a high fico credit score are because they pay the bills on time. They go for a credit line increase only when needed. They apply for and open new credit accounts only when there is a requirement. They do not max-out credit cards.

The Fico credit report is regularly updated with new information from your creditors. So your fico credit score two weeks ago is probably not the exact score a lender would get from the consumer reporting agency today. Fico scores range from 300 to 850. For a Fico score to be calculated on your credit report, the report must contain at least one account which has been open for six months or more. Also the report must contain one account which has been updated in the past six months.

There is no such thing as a good fico credit score. It is hard to say what a good score beyond the context of a particular lending decision. Fico scores are considered on the basis of your payment history, length of credit history, amount owed, any new credit and types of credit in use. The higher your fico score, the lower risk are you to the lender or the creditor.

Everybody should work on to improve there Fico Credit Score !

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