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to FAQ's > |
| What
is a FICO score? |
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A
FICO score is a credit score developed by Fair Isaac
& Co. Credit scoring is a method of determining
the likelihood that credit users will pay their bills.
Fair, Isaac began its pioneering work with credit
scoring in the late 1950s and, since then, scoring
has become widely accepted by lenders as a reliable
means of credit evaluation. A credit score attempts
to condense a borrowers credit history into a single
number. Fair, Isaac & Co. and the credit bureaus
do not reveal how these scores are computed. The Federal
Trade Commission has ruled this to be acceptable.
Credit scores are calculated by using scoring models
and mathematical tables that assign points for different
pieces of information which best predict future credit
performance. Developing these models involves studying
how thousands, even millions, of people have used
credit. Score-model developers find predictive factors
in the data that have proven to indicate future credit
performance. Models can be developed from different
sources of data. Credit-bureau models are developed
from information in consumer credit-bureau reports.
Credit scores analyze a borrower's credit history
considering numerous factors such as: |
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Late payments |
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The amount of time credit has
been established |
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The amount of credit used versus
the amount of credit available |
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Length of time at present residence |
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Employment history |
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Negative credit information
such as bankruptcies, charge-offs, collections,
etc. |
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There
are really three FICO scores computed by data provided
by each of the three bureaus––Experian,
Trans Union and Equifax. Some lenders use one of
these three scores, while other lenders may use
the middle score. |
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| Frequently
Asked Questions (FAQs) |
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| How
can I increase my score? While it is difficult
to increase your score over the short run, here are
some tips to increase your score over a period of
time. |
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Pay your bills on
time. Late payments and collections can have
a serious impact on your score. |
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Do not apply for credit frequently.
Having a large number of inquiries on your credit
report can worsen your score. |
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Reduce your credit-card balances.
If you are "maxed" out on your credit
cards, this will affect your credit score negatively. |
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If you have limited credit, obtain
additional credit. Not having sufficient credit
can negatively impact your score. |
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What
if there is an error on my credit report? If
you see an error on your report, report it to the
credit bureau. The three major bureaus in the United
States are:
Equifax (1-800-685-1111)
Trans Union (1-800-916-8800)
Experian (1-888-397-3742)
All have procedures for correcting information promptly.
Alternatively, your mortgage company may help you
correct this problem as well. |
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