Published to Newsletter on Oct 26, 2022
So, what is a credit score and how is it determined?
Let’s start with your FICO score, a score created by the Fair Isaac Corporation and used by over 90% of top lenders when making lending decisions. FICO scores are the industry standard for lenders to make more accurate and fair decisions about your creditworthiness.
FICO scores are determined using many sources of data from your credit report, including payment history (35%),
dollar amounts owed (30%), length of credit history (15%), new credit (10%), and mix of credit types (10%). Positive and negative information in your credit report influences your score. For example, late payments will lower your score but having or rebuilding a good track record of making payments on time will raise your credit score.
Every lender decides for themselves what a good FICO score is and how it will be combined with other information about you to approve your loan or credit score. And even a good score can be improved with time and effort. Many lenders view scores above 670 as good creditworthiness. The higher your score, the lower the risk to the lender, and the more likely it will be that a creditor will lend to you and give you their best interest rate.
The FICO score ranges can give you an idea of where your score is currently, and help you set goals for improving your score. Click here for rating ranges and more information. The good news is, even if your FICO score is in the poor or fair range, you can improve your score over time. Repairing bad credit or building a credit rating for the first time takes time, patience, and commitment.
A good first step is to request copies of your credit report from the three major credit bureaus, Equifax, Experian, and TransUnion, to see if there are errors that can be disputed. Dispute any inaccurate or missing information by contacting the credit reporting bureau and the lender. Learn more about disputing errors on your credit report.
Free copies of your credit reports can be obtained every 12 months from each bureau at AnnualCreditReport.com.
It’s important to remember that checking your own credit report or FICO score will not impact your score. This important habit will help you get started toward building the highest score possible over time.
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