What is your FICO score and why is it so important
- Author Grant Eckert
- Published May 23, 2007
- Word count 646
In an epic ending to 1999's hit movie "Fight Club", both Helena Bonham Carter's and Edward Norton's characters stand in a high rise building, watching through a window as all of the surrounding credit card company buildings implode and collapse around them. Many moviegoers-whether consciously, unconsciously or subconsciously-took satisfaction in that apocalyptic scene where everyone's credit card debts had instantly been obliterated.
However, it was only a scene in a movie. Besides, it is a bad FICO score that is the root of the problem for those who cannot buy their dream home or get that much-needed car loan. And for those of us in the real world, the all important FICO score is here to stay. Credit card debt is one bit of data that comprises the FICO, but there are several other factors. And those factors can be mitigated if a person knows exactly what a FICO score is and why it so important.
The FICO score is a telltale sign of a person's ability and habit in paying bills. The score tells a potential lender whether a person's behavior towards her/his finances is responsible or neglectful. The higher it is, the better a person is looked upon by lenders, car dealers, credit card companies, etc. There are a few aspects that go into composing the final FICO score that can be completely improved by a positive, more responsible change in a person's financial behavior. The composition of the FICO score includes:
-
The number of late payments on bills, bankruptcies—personal and business, and other instances where someone may have dropped the proverbial ball in her/his finances. The fewer late payments, the better your score -- though a recent late payment hurts your score more than one from five years ago.
-
Any extremely large debts. What a person owes on credit cards and on the balances of loans are very revealing of a person's behavior with her/his finances. A mortgage company will look at a person as a huge risk if they use a lot of offered credit. This will appear to a company that a person is taking advantage of credit without assuming the responsible consequences of paying the bill.
-
How long a person has had credit. How long a person has had credit cards, credit accounts, and how much they use them demonstrates a person's financial pattern. A lending company can determine if a person is constantly making on-the-spot purchases or if she/he is more discriminating in their purchases. If so, a discerning withdrawal pattern shows responsibility and that careful consideration goes into purchases. This shows that a person is consistent in most of their financial dealings. The length of a person’s credit history is also important because it will provide more detailed information to the creditor about a persons credit.
-
New and recent applications for credit. Several applications for different types of credit or the same kind in short period of time could be indicative of a person's poor handling of finances. This could mean that a person is good at borrowing money but not at paying it, which would turn lenders off.
-
Types of credit. This includes credit cards, home mortgages and loans, etc.
Other dynamics such as length of time a person has worked at varying places of employment and the value of other owned properties can influence a lender in the decision making process. However, American law forbids personal information like ethnicity, religion, sex or marital status from being considered, just as no one can legally be denied the right to take up residence anywhere for those dame reasons. By putting a little extra effort towards improving the different aspects of the FICO score, credit card companies and loan companies may become a bit nicer. And, unlike in "Fight Club", a person could feel a little bit friendlier towards them in the end.
Grant Eckert is a writer for Absolute Mortgage Company. Absolute Mortgage Company is a leading provider of Home Mortgage Lender| Mortgage Refinancing
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- Costs of arranging a Mortgage in Spain
- Non resident Mortgages in Spain
- Effective Strategies for Paying Off Your Mortgage Faster
- How Does Equity Release Work?
- Florida First Time Homebuyer: The Indispensable Guide of Tips, Programs, and Resources
- How to Become Debit Free?
- Sellers Concession the Closing Cost Option
- Financing Short Term rentals with DSCR loans
- Why move to Roseville CA
- Simple Interest Mortgage Advantage
- Are Low Doc Commercial Loans available in Australia
- How to Obtain a Rural Agriculture Loan Quickly and Easily
- What is a Caveat Loan?
- Tips for improving your Credit Score before getting a Home Loan
- 3 Things To Look out for With An Equity Release Mortgage
- Manage your Debts by Refinancing your Current Home Loan
- How to Get a Home Loan with Unusual Employment or Income?
- 20 Effective Debt Consolidation Loans Tips with Bad Credit
- Tips for Choosing a Non Conforming Lender
- Why is a Good Credit Rating Important in Australia?
- Most Common Ways That People Fall Into Personal Bankruptcy
- How to Choose a Consumer Credit Counseling Agency?
- Consolidate Your Debts and Take Control of Your Finances
- How to get a Home Loan due to a Bad Credit Report
- Debt Consolidation Home Loans are a Solution to Multiple Debt Problems
- Facts You Should Know About Low Doc Home Loans in Australia
- No Doc Loans from Private Lenders
- Home Loans to Consolidate Debt for People with Bad Credit
- How Can I Get a Mortgage If I Have a Bad Credit History?
- Guidelines to Fix Bad Credit Effectively Through Dispute