Are you curious as to what your Fico Score is? FICO's scoring algorithm has been modified many times over the years since its introduction in 1989. FICO is regularly updated and lenders use it to decide whether you should upgrade your FICO rating. The following are some things you should know about your FICO score.
History of payments
Your FICO score is determined by many factors, but the two most important ones are your credit utilization and payment history. Both these factors are affected by the amount you owe in relation to what you have. Your credit mix is also a factor. It describes how many accounts and loans are available to you.
Payment history is the most important of all these factors. This information is used by over 90% of lenders to evaluate a borrower’s creditworthiness. It is important to make on-time payments on all accounts, both current and previous. FICO research has shown this to be the best predictor of someone's ability repay debt. Bankruptcies and collection accounts are considered part of a person's payment history, and they can hurt their scores.
Accounts owed
FICO scores are calculated from pieces of data in a credit report. The FICO scores can be broken down by the amount of debt and the frequency with which payments have been made. Payment history is a key factor because it indicates how well a person pays their debt over time. Accounts owed shows the amount of money a person owes, as well as how many times they've made late or missed payments.
Accounts owed and Fico scores are closely related, as each one can affect the other. However, a high balance does not necessarily mean that you're in trouble. A high percentage could indicate excessive debt which can make it difficult for you to make monthly payment.
Credit history length
There are many factors that could affect your credit score. The length of your credit history is just one. Generally speaking, the longer your credit history, the better. Because lenders are looking for long-term payments history, this is a good rule of thumb. Lenders also look at the frequency with which you have opened new accounts. If you have a short history of timely payments, lenders may worry that you will have trouble paying off your new debt.
While the age of your accounts can impact your score, it's not as significant as other factors. Although it's possible to score low without much history, a longer history will result in a higher FICO score. Your score will also be affected by your age.
Credit mix
The best way to improve your Fico scores is to diversify your sources of credit. This means taking out loans of various types, such as revolving accounts. Combining installment and flexible credit is the best form of credit. Even if you have a small credit balance, a combination of both types of credit accounts will improve your FICO Score.
You should also open a credit account. This type of revolving debt will improve your credit, which will make it easier to get loans in the future. However, you should not apply to too many credit cards if you have a poor credit history. Rejections can be damaging for your fledgling credit score.
New credit
Your new credit score refers to a section of your credit report that includes information about new credit accounts. A new account is one that you have opened in the past six to twelve month. Your score will be affected if your application is declined. This information could also impact your eligibility for loans or credit cards.
The new scoring system is expected to impact more than 80 millions consumers. Some consumers will see an increase in their score while others will see a decrease. The change will have a big impact on people who fall behind on their loan payments. Personal loans pose a particular risk as they don't require collateral.