Saturday, July 19, 2008

What is FICO

FICO scores are your credit rating. FICO stand for Fair Isaac Corporation and is used by the three credit bureaus to determine your credit worthiness. When I first applied for my credit card as a college freshman, I had never heard of a FICO score. Which is why I firmly believe that high schools should implement a Credit 101 class for seniors. I believe it is very important to teach kids about credit so that they will make more sound financial decisions for their future. Here are a few key facts regarding FICO scores.
  1. They range from 300-850, higher is better
  2. Higer scores mean lower interest rates
  3. Scores calculated based on the following categories:

Payment history - 35%
Amounts owed - 30%
Length of credit history - 15%
New credit - 10%
Types of credit used - 10%

4. The median FICO score in the U.S. is 723

It is very important to use your credit responsibly in order to raise your score. Paying your bills ON TIME is foremost and important!!! When you do use your charge cards keep your balances low, high debt can affect your score. Also, do not apply for a lot of new accounts, which could rack up inquiries on your report. This has also affected scores as well. We have to be more informed and aware of our credit score and what's in our report. You can order your credit report once yearly. This is a good habit to get in and it's free! This is basic info that everyone should know to help in the long run.

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