Many of us only care about what our credit score says and nothing more. However, there are a lot of hidden aspects in your credit score that you may not know about. You may have heard of the word FICO, but do you know what the term means? Stay tuned to learn what FICO means in your credit score, plus other hidden data that you may not know about.
The Meaning Behind FICO
This may blow your mind a little bit, but that little acronym that we all are well aware of comes from an actual company name. The company name is the Fair Isaac Company. This is the company that helps to come up with your credit score.
Keep in mind that FICO is not a credit reporting agency. In fact, the only 3 credit reporting agencies are Experian, TransUnion, and Equifax. Each of these 3 agencies report information that helps come up with your actual credit score.
Believe it or not, but the FICO score wasn’t even introduced until 1989. How crazy it that? Now the credit score is well known in many parts of the world.
What Goes Into Your FICO?
You may be wondering how these companies, who don’t know you, can come up with a credit score. Well, your FICO is actually composed of five different factors. The largest factor, your payment history, accounts for roughly 35% of your actual FICO score.
Next, at 30% of your score, is the amount of debt you currently owe, followed by the age of your credit history, which is 15% of your score. You’re not done yet though. New lines of credits, or inquiries, make up 10% of your score, and the remaining 10% is the combination of your types of credits and accounts.
The percentage of each factor can vary, from person to person, pending the length of their credit history.
What Kind of Score Can You Have?
You may think that credit scores begin at 0, but that’s not true. Credit scores actually range from 300-850, with 850 being the best score possible.
The lower the number, the more risky it is for lenders or insurers to approve you for a loan or policy. The higher your FICO score is, the more easily you will get approval, and the better rates you will likely encounter.
A perfect score is certainly something to aim for, however it is not the end of the world if your score isn’t perfect. In fact, only about .5% of consumers have achieved having perfect credit. Scores are categorized from bad, to good, to excellent, and then perfect.
Hidden Data in Your Credit Score
When it comes to your credit score, you may be wondering what your credit score says about you. A creditor looking at your credit score can gauge a lot about you just from a score. While nothing is set in stone, there is some hidden data in your credit score.
Unfortunately, when creditors see your score at 300-600, they may see you as not being in a very good place. Sometimes your credit score may get low due to a bankruptcy or a foreclosure. It’s safe to say that your score will bounce back, but it may take 10 years or so for it to start improving.
When you have a score of this amount, it doesn’t look too bad. It’s still not “supreme” in the eyes of creditors, but you’re getting there. When a creditor looks at your score, they might see that you’re still going through of a bit of a hard financial time.
Getting to this point is a great milestone in your credit. If you’re applying for a loan or credit card at this point, you will most likely get a really good interest rate.
When you’re getting higher than 781, you’re rocking your credit score. Any creditor will be thrilled to work with you and you can get awesome interest rates as well! The hidden data here is that people can see that you’re trying really hard with your credit and that you’re doing a great job.
If you’d like to learn more about your FICO score, read more at Crediful.com. Your credit is an important part of your life, whether you choose to address it. Having a good FICO score might mean some of the following:
- Qualify for a car loan at a good interest rate
- Qualify for a mortgage at a good interest rate
- Qualify for a home equity loan
- Qualify for a credit card
- Qualify to rent a home
Having a good credit score is important, but it’s not the end of the world. Keep in mind that it only takes a few months to improve your credit score. In no time, you can go from 300 to 600.
What is your credit score? Do you plan on trying to increase it?