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What's the best credit score? | Understanding FICO
Your credit score is one of the most important numbers in your life. It can help you get loans at the best interest rates, get insurance at the lowest rates and it could play a role in helping you get a job or even something as simple as financing a cell phone. Let's take a look at how you can achieve and maintain the best credit score possible.
What is a FICO Score?
FICO stands for Fair Isaac Company, a nationally known credit scoring company that offers debt and other information to creditors, lenders and anyone else who needs to know something about a person’s ability to successfully handle debt. If you have a credit card, you may see your FICO score each time you get your statement.
How Is Your FICO Score Determined?
Your credit score is determined by five key factors. The two most important factors are your ability to make payments on time as well as the total amount of credit that is available to you. Other important factors include the amount of credit you have, your credit “mix,” and whether you have recently applied for new accounts such as a credit card or an auto loan. Those who don't have any payments 30 or more days past due and who use less than 30 percent of their available credit tend to have the highest credit scores.
Where Do You Fall on the FICO Scoring Range?
There are a few different categories that help creditors and lenders determine your ability to repay a debt. Credit scores of 740 or higher are indicative of an excellent borrower, and anyone with a credit score of 800 or higher is thought to have the best credit score possible. Scores between 700-739 are considered very good while a score of 640-699 is considered to be good or above average. Anything below 640 is considered to be below average and possibly a bad risk for a lender.
The Benefits of Having a Good FICO Credit Score
Typically, those who have a good credit score are thought to be more responsible and trustworthy than those with poor credit. This is because people who are good with money tend to pay attention to details and otherwise take care of their other responsibilities in life. Therefore, they enjoy many advantages that those with average or bad credit don't get. For instance, they may qualify for lower rates on loans as well as greater access to credit when they need it. This may make it easier to consolidate debt at lower rates or take out a loan without the need for collateral or a cosigner.
Who Uses Your FICO Score When Making a Credit Decision?
Whenever you apply for a loan, there is a good chance that the lender providing the loan is going to look at your FICO score. Typically, your FICO score is used to determine whether you qualify for a mortgage, an auto loan or a credit card. Your credit score may also be used by insurance companies or any other vendors that allow you to pay for goods or services through installment payments. It is important to note that lenders may also look at your income, job status and other debt before making a loan decision.
If you are having trouble keeping up with your debt, it may be best to talk to a debt relief attorney. The offices of John E. Pytte can help you explore your options, which may include debt forgiveness or consolidation. It may also be possible to file for bankruptcy to discharge some or all debt. Depending on your credit score, bankruptcy may wipe away debt without doing damage to your credit score or history. We encourage you to contact us today for a free debt relief consultation.