Understanding Your FICO Score
My friend, Kathy Daubert, from Wells Fargo Home Mortgage, will be posting a series of articles explaining Credit Scores. They'll be linked to each other and placed in the "credit score" category. I'm confident they'll be very helpful.
What exactly is a FICO score? When you apply for a loan, whether mortgage, car loan, or credit card, lenders want to know your credit risk level. There are 3 major credit reportig agencies (Equifax, Experian, and TransUnion) in the US that maintain records of your use of credit. The most widely used credit scores are FICO scores, the credit scores created by Fair Isaac Corporation. Lenders can buy FICO scores from all three major credit reporting agencies. They use FICO scores based solely on infomrmaton in comsumer credit reports maintained at the credit reporting agencies.
Your credit score influences he credit that's available to you and the terms (interest rate, etc.) that lenders offer you. A better FICO score means better financial opportunities for you.
More information on FICO scores and credit scoring can be found on the FICO website.
Fair Issac was founded in 1956. It uses advanced math and analytics to help businesses make smarter decistions. As well as inventing the FICO score, Fair Isaac has also created other leading tools, including products that help businesses detect credit fraud, manage credit accounts and automate complex business decisions. It is important to note that while Fair Isaac works with the credit reporting agencies to provisde your FICO scores, it does not dertermine the accuracy of the information in your credit report. Thus, the importance of keeping aware of your credit score. It's up to you to make sure of the accuracy.
How FICO Scores Help You: FICO scores give lenders a fast, objective estimate of your credit risk. Before the use of scoring, granting credit was a slow, arduous process. The use of credit scores have brought consistency, fairness, and efficiency to the process. People can get loans faster, many times within minutes or hours, instead of weeks. Credit decisions are more fair using FICO scores because lenders can focus on the facts related to the credit risk, rather than personal opinions or biases. Older credit problems fade as time passes, affecting your score less and less.
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