If you know the answer to “What is a FICO® Score?”, you probably keep a watchful eye over your finances. Bravo! If you don’t know the answer, you’re not alone. But, it’s a key component to your financial health, so let’s chat about it.
What is a FICO® Score?
By definition a FICO® Score is a type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant’s credit risk and whether to extend a loan.
Each of us have three FICO® Scores based on Equifax, Experian and TransUnion data, and you may contact them individually to get those scores. Alternatively, your financial institution may provide FICO® Score information as a member benefit (e.g. Discover).
FICO® Scores are a snapshot of an individual’s credit risk and they take into account five different factors:
Payment history (35%)
Current level of indebtedness (30%)
Types of credit in use (10%)
Length of credit history (15%)
New credit (10%)
What is a good credit score?
FICO® scores range between 300-850, higher being better. A good credit history will yield scores of 650 and above, while scores of 620 and below make it much more difficult to secure credit at favorable interest rates. The best interest rates will be reserved for those with very high FICO Scores.
Before applying for credit, you should know your FICO Score. If you have a high score, you can leverage that in your negotiations. If your score could use some improvement, the good news is that you can improve it!
How to improve a FICO® Score
The quickest and most efficient way to improve a FICO® Score is to pay all of your bills on time, pay off delinquencies and reduce your total credit card debt so that your outstanding debt to available credit ratio is as low as possible. You do want to use credit because it’s the only way to build a credit history. Just do it responsibly and keep that ratio in check.
FICO® Credit Score Tracking
Discover, who was the first major credit card company to proactively offer credit scores to their cardmembers recently launched an exclusive offer for cardmembers to track up to a year of their FICO® Credit Scores for free. Also, there is no impact on your credit when you access the information.
FICO® Scores for free appear in an easy-to-read chart format on cardmembers’ monthly statements and online. It enables consumers to stay on top of their credit, better understand score fluctuations and avoid surprises., Discover is now helping cardmembers stay on top of their credit history by allowing them the online option of viewing key factors impacting their FICO® Scores and up to a year’s history.
Do you know your FICO® Score? Do you track it regularly?
I’m a Discover Preferred Blogger and receive information and resources which I use to help me create content each month. All opinions and thoughts remain my own.