Your Credit Report Is Based On FICO: Improve Your Score

By: Dee Power

The acronym FICO stands for Fair Isaac & Company, the actual company who pioneered this mathematical calculation, during the late 1950's. It is the credit model used to determine one's credit score and dependability. The term "FICO score" is just another way of referring to a credit score.

The FICO score is based on several factors. These include: late payments, missing payments, number of open accounts, length of one's overall credit history, actual amount of available credit used and negative occurrences such as charge-offs and bankruptcy. There are also points deducted for how many times your credit report is accessed by someone other than yourself. If you're looking for a loan don't apply at several different companies at once, because they'll each look at your report. Each time they look it increases the possibility your score will drop a point or two.

Points are given for each of these factors, after which a credit score is computed. To a certain extent, each credit bureau has the leeway to base their scores on their own criteria. That's why each one can come up with a different score. No one except Fair Isaac and the three major credit bureaus know how this is done. The Federal Trade Commission has ruled against this information becoming public knowledge.

What does this mean to you? It means you need to do all that you can to build a positive credit history. Negative credit cannot be magically erased overnight. The lower your FICO score, the harder it will be to obtain the credit that you need. The loans you do obtain will be at higher interest rates with stiffer penalties.

Debt consolidation may be a way to start building your credit score. Although it will take time.
In many cases, it can take years to recover from financial crisis and a bad credit score. This unfortunate situation can (and probably will) affect things such as where you live, the vehicle you drive, the job you have and your ability to obtain adequate insurance.

An option to improve your score is to look at
credit card debt consolidation. Use a home equity loan to pay off your debts. If the loan isn't enough to pay the total amounts owed, consider a debt settlement option. Credit card debt settlement means that each creditor agrees to accept a lesser amount than that owed as payment in full. In the short run your credit score will decrease. However, if you start making your payments on time you can rebuild your good credit standing.

Article Source: http://www.myhotarticles.com

Dee Power is the author of several nonfiction books. Find out more about debt consolidation options and about FICO Read Dee's blog on finance.

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