How FICO® Scores Work

1) How do the scores work?

When you apply for a credit card or loan, the lender will want to know what is the risk they are taking.   The “FICO®” scoring system is what most lenders will use to find the level of your credit risk.   All of us have FICO® scores.   We have one for each credit bureau.  These are: Experian, TransUnion, and Equifax.  Each score is based on that credit bureau's information on file.  Informational changes will tend to change your credit scores, but any changes, TAKE TIME, to affect the scores…

 

Taking steps to improve your FICO® scores may help you qualify for larger loans and / or better rates from lenders!

(Remember, changes to you situation may take some time to eventually affect your scores!)

 

2) Higher FICO® scores should yield lower payments…

An example of interest rates on a $150,000 30-year, fixed-rate mortgage might be as follows:

Your FICO® Score

Your interest rate

Your monthly payment

760 - 850

5.96%

$896

700 - 759

6.19%

$917

680 - 699

6.36%

$935

660 - 679

6.58%

$956

640 - 659

7.01%

$999

620 - 639

7.55%

$1,054

Actual Rates may vary by day…

In this example, with a FICO® score of 760 or better, one might pay $202 less per month than a person with FICO® scores below 620.  This is a savings of $2,424 a year!   Showing that it pays to improve your FICO scores! 

3) Know and Improve Your FICO® Scores

The first step to improving your FICO® scores is getting access to your current FICO® scores and credit reports. “myFICO” offers instant online access to all three of your current FICO® scores and credit reports.

Once you've gotten access to your FICO® scores, you'll want to know how to improve them.  "myFICO" is the ideal starting place if you’re new to learning about managing your personal credit risk and improving your FICO® scores over time. "myFICO" offers an explanation of the positive and negative factors affecting your scores and access to the FICO® Score Simulator, which helps you decide the best ways to improve your FICO®  scores.   Some time is required to change your scores.    

For more information go to: http://www.bankrate.com ... there you can run either an a full "FICO® test" or an “estimator."  The estimator has just 10 questions and can be found at : http://www.bankrate.com/nltrack/fico/calc.asp?lpid=BKRATE29

 

See How to "Cancel a Credit Card"