My Free Credit Report

Most people know that they have a credit report which is kept by several major credit bureau and one very important part of your three bureau credit report is your FICO score. But just what is your FICO score and how does it affect your borrowing decisions?

FICO is formed from the first letters of the Fair Isaac Corporation who came up with this method of credit scoring and is a number that is typically betwen 350 and 850 that ranks credit worthiness according to a proprietary algorithm invented by the company, with 350 being the poorest score and 850 being the best.

In spite of the fact that the precise details of the algorithms are a closely held secret, over the decades many people have be able to word out several of the important elements. For example, any late payments will reduce your score and the greater the number of late payments you have and the later they are the more heavily the credit score is reduced. The overall amount of debt carried each month is yet another element. A not quite so important factor is the number of credit cards you hold and the number of credit checks performed out on your account.

Any FICO score of below approximately 620 is considered as marginal and a score of below 580 is decidedly poor. A FICO score of 720 or more is very good to excellent. A FICO score which falls between 620 and 720 represents something of a gray area where factors other than simply your FICO score will play an important role in any loan decisions.

Mortgage lenders, banks, credit card issuers and others will look at your FICO score as an extremely important factor in deciding whether to grant you a loan. They will also take your score into consideration when deciding what interest rate to charge you. Other things being equal the greater your score the lower the interest rate you can obtain.

A lot of the time of course everything thing else is not equal and prevailing interest rates in general, the overall demand for loans, the overall economy and a host of other factors will have a substantial influence on whether or not lenders will lend and at what rate they will lend.

Yet another extremely important factor in the equation nowadays is the widespread use of computers which has altered the financial industry significantly during the past 20 years and also provided consumers with much more fast access to services and products using the Internet.

Even with all these changes your FICO score remains a primary tool for almost all lenders and, though it might not determine the final decision, it certainly influences the ‘first cut’ when faced with a pile of applications to either approve or disapprove.

Luckily for those people who are in some financial difficulty there are choices and even if your FICO score is not very high you nevertheless have several options open to you. The first thing to do however is to get some debt support and set get yourself a plan to raise your score.

As you work to get rid of those overdue debts by paying them down or by negotiating with the creditor your FICO score will gradually improve. And remember that the age of your 30 and 60 day past due and late payments is a consideration in calculating your score.

While you are raising your score though you can also look around for lenders who are willing to take a higher risk by lending you money. The problem of course is those loans almost always carry a higher interest rate. If you can your best course of action is to try to forego borrowing for a while while you work to raise your FICO score.