More and more creditors, as well as employers, insurance companies and landlords have been moving toward a relatively new tool in determining your creditworthiness. That tool? Something called a FICO score. Oh sure, most creditors still check your credit report, but some are using it in conjunction with your score as well. There are some folks out there who are simply going by your FICO score an not even bothering to look at your credit report.
Your score is simply a numeric representation of what your creditworthiness really is. Where it comes from information on your credit report, it's easy to see why some aren't even bothering to pull a credit report any longer. This highlights even further why it's important to know exactly what's in your credit report and that the information is correct. Although you may run into a creditor, insurance company, employer or landlord who only looks at your FICO score, if the info. in your credit report is incorrect, your score will reflect this incorrect information.
Your FICO score, just like your credit report, is a snapshot into how well you've managed your credit in the past. When dealing with credit, most creditors look at past history as a good indication of how well you will handle credit in the future.
There are plenty of credit scores in existence today, with each of the credit reporting agencies having developed their own. However, the FICO score is the industry standard. If you aren't sure of what your FICO score is, you can get it by going to fico dot com.
The FICO score ranges from 350 to as high as 850. The higher your score is, the better your credit is. For those with a score of at least 720, they can rest easy because they are considered to be very good credit risks. If your score is well below 720, you could still qualify for credit, insurance, etc., but you'll be faced with paying a higher premium or interest rate. In terms of insurance, you may not be able to get as much coverage as you'd like with a poor score. Other issues include not getting a promotion because of a low score, or not getting a particular job – especially one that deals with money. Landlords may choose not to rent to you as well.
The good news in all of this is that you can in fact raise your FICO score. The top 5 ways to do so are:
1. Paying Down Any Account Balances
2. Start Paying Your Debts On A Timely Basis
3. Build Up Your Savings Account
4. Cut Back On The Credit You Apply For
5. Correct Any Errors Or Past Problems With Your Credit History
Just as with a credit report, knowing your FICO score is critical to being able to maintain a positive credit history as well as acting as a starting point when putting a plan together to improve your financial situation.