What is a Credit Score?
A credit or FICO score suggests the ability and willingness of an applicant to be able to repay debt. This score is compared and evaluated against other consumer credit reports, and is,in essense, a "barometer" to measure hte likelihood that the debt will be repaid in a timely manner. Higher scores indicate a a better chance that the applicant will repay the debt as agreed, with no collection efforts required by the lenders. In effect, a higher score can mean the debt is "self-servicing", with payments coming in on time.
A lower score may indicate the need for some collection efforts on the part of the lender. Payments may come in late, or serious collection efforts may be reuired by the lender to collect deliquent payments. A substantially lower score may indicate the debt may become uncollectable for a lender, and as such, the lender ,ay decline an application with a significantly low score.
Results in scores ranging from 350 (highest risk) to 800+ (lowest risk). Higher scores may mean a lower chance of default or late payments and may generate better terms.
So what exactly goes into calculating a credit score?
PAYMENT HISTORY (35%) - Account payment information and payment patterns
AMOUNTS OWED (30%) - Number of accounts with balances, the amounts owed on specific types of accounts and the proportion of credit lines used.
LENGTH OF CREDIT HISTORY (15%) - Time the accounts have been open.
NEW CREDIT (10%) - This includeds the number of recently opened accounts & inquiries, the time since recent account openings and the re-establishment of positive credit history.
CREDIT MIX (10%) The number of various types of accounts.
A lower score may indicate the need for some collection efforts on the part of the lender. Payments may come in late, or serious collection efforts may be reuired by the lender to collect deliquent payments. A substantially lower score may indicate the debt may become uncollectable for a lender, and as such, the lender ,ay decline an application with a significantly low score.
Results in scores ranging from 350 (highest risk) to 800+ (lowest risk). Higher scores may mean a lower chance of default or late payments and may generate better terms.
So what exactly goes into calculating a credit score?
PAYMENT HISTORY (35%) - Account payment information and payment patterns
AMOUNTS OWED (30%) - Number of accounts with balances, the amounts owed on specific types of accounts and the proportion of credit lines used.
LENGTH OF CREDIT HISTORY (15%) - Time the accounts have been open.
NEW CREDIT (10%) - This includeds the number of recently opened accounts & inquiries, the time since recent account openings and the re-establishment of positive credit history.
CREDIT MIX (10%) The number of various types of accounts.
