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The term FICO refers to Fair Isaac and Corp. which developed the system that credit bureaus use to calculate your credit scores. The score is omputed based on your credit history. A lender can look at your FICO score and assess what kind of credit offers or interest rates you qualify for.
You have three credit scores, one from each of the three major credit bureaus: Experian, TransUnion, and Equifax. For your scores to be calculated, each of your credit reports must have at least one account that has been open at least six months.
Thirty-five percent of your credit score is based on payment history. Thirty percent is based on amounts you owe. Fifteen percent is based on the length of your credit history. Ten percent is based on new credit. And another 10 percent is based on types of credit used, according to What's in your FICO Score at myFICO.com.
A poor credit score is anything under 580, according to Bad Credit Repair. Even a score of 580 to 619 is low, and it mean you'd pay a hefty amount in higher interest rates on loans. If your credit score is below 499, you need serious credit repair.
Your FICO score can make a
huge difference in how much money you end up paying over the life of a loan. For instance, with a 30-year mortgage on a $300,000 loan, just a 100-point difference in your score could equal $40,000 extra in interest payments, according to Your FICO Score Is Pivotal at myFICO.com.
Your credit score changes over time, and that's good news. You can improve your credit by making just a few changes each month. For instance, you can pay your bills on time. Get any past due bills up to date and make sure they stay current. Try not to get accounts put into collections, and try your best to avoid going into bankrupcty. These things will stay on your credit report for seven years. If you are having challenges paying all of your bills, contact the creditors to see if they can work out something for you. You can also contact a credit counselor. Keep the balances on your credit cards as low as possible. If you do these things, over time your credit score will get better.
You can request your credit report for free each year from Annual Credit Report. You'll get your report from the three major credit bureaus so you can make sure you stay out of the poor credit range.