Invented by the Fair Isaac Corporation, FICO is a numerical snapshot of a consumer's credit worthiness. Based on payment history and debt-to-credit limit ratio, a credit score will determine how good a consumer is at paying his bills on time. If you want to determine your FICO score, read on to learn what a FICO score can mean for you and your family as well as how you can increase your FICO score.
Instructions
1. Understand what a FICO credit score is and why it matters to you and your family. The three nationwide credit bureaus, Equifax, Experian and TransUnion each have a file that details how good you are at paying your bills and how much debt you owe. Using a sophisticated mathematical formula, each bureau designates a credit score based on the credit information that it has received from your creditors. That score is known as your credit score and is used to provide lenders with a snapshot ranking of your credit worthiness. This information will determine credit card, home and auto interest rates you are assigned as a consumer.
2. Request your credit score at myfico.com, annualcreditreport.com or at any of the three nationwide credit bureaus for a nominal fee. That fee can range from $5.95 to $15.95 dollars. Because your score may vary from bureau to bureau, it is best to request your credit score from each bureau.
3. Understand how FICO is scored. FICO scores range from 300 to 850; the higher the score the better the standing. Generally, a score of over 750 will qualify you for lower interest rates and mortgage loans. The FICO credit ranking is as follows: 330 to 619 (poor credit); 620 to 659 (low to average credit); 660 to 720 (average credit); 721 – 750 (good credit); 751+ (excellent credit).
4. Understand what factors contribute to your FICO score. The factors include payment history, debt-to-credit limit ratio, length of credit history, type of credit and inquiries made for new credit.
5. Get on the road to a higher FICO score. Add your total unpaid balance (debt) and divide by the total amount available on the credit account (credit limit). That number will determine if you have a high or low debt-to-credit limit ratio. To raise your FICO score, you need to lower your debt-to-credit limit ratio. To do this, start to pay beyond the monthly minimum payment, eliminate or reduce high interest credit cards, and pay each creditor on time.
Tags: credit score, FICO score, debt-to-credit limit, debt-to-credit limit ratio, limit ratio