Know Your FICO Score
FICO measures credit-worthiness. Underwriters have determined that people with low FICO scores default on loans with far greater frequency than do their higher scoring peers, so they use three credit bureaus — Equifax, Experian, and Trans Union — to determine your score in several ways:
1. Delinquencies: A 30-day late payment is less risky than a 90-day late payment.
2. New credit: Your score drops when you open several credit accounts in a short period, as you may be unable to meet new credit obligations.
3. A long credit history is better than a newly established one.
4. A consumer with “maxed out” cards may have trouble with payments.
5. Public records: Tax liens and bankruptcies jeopardize a healthy FICO score.
6. The use of consumer credit counseling agencies may lower scores.
7. Small balances, no late payments show responsibility.
8. Too few revolving accounts: If you fail to use credit, there is no way to evaluate your ability to manage it.
9. Too many revolving accounts may mean over-extension.
10. Credit scores affect interest rates. Some lenders establish lower interest for high FICO scores and vice versa.
11. Most importantly contact a professional before making changes to your credit, especially before making a large purchase.
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