FICO score is used by banks and lenders to make decisions regarding forwarding any credit to you or not. This score is based on what is in your credit report at present and does not consider your past credit history. FICO score has a range of 300 – 850, with a national average of 723 as per Fair Isaac Corporation, the developers of the FICO scoring system. They further add that “anything below about 550 is considered awful.”
There you have it officially by those who invented the system. Your FICO score should be above 550. But that still does not tell what a ‘good’ score is.
Your FICO Score Matters
Your FICO score matters a lot as your lenders depend on it to accept or reject your worth as a credit risk. Banks and private lenders do not entirely base their decisions on this score but it plays a big hand. Lenders do collect other information on prospective clients from various other sources, but through FICO score they know your risk level.
Experian, TransUnion, and – the three main credit bureaus maintain records of your credit dealings from all over the United States. These credit records are available to all banks and other private lenders who wish to decide on your loan application. These credit bureaus also issue FICO scores though they may vary slightly from one another. This is because of their different sources of information.
You need to keep your FICO score at a higher level as it helps banks and loan processors to process your request fast. The higher your credit score the faster your application will go through and the score will have a large and positive influence on what rate of interest you will have to pay and what other terms you are offered.
How Does A Good FICO Score Help You
With most of the lenders basing their decisions on the FICO score, you are assured of a consistent and fairly unbiased process of approval for your request for loan. But no FICO score is ever termed ‘good’ or ‘bad.’ There is no score that is considered a ‘cutoff’ point above which you get your approval and below which your application is rejected.
Though your FICO score may assist a lender in making a decision, he or she probably will not solely base the decision on it. Most lenders have their own strategy in coming to a final decision. Depending on a number of things you may get an approval with a FICO score of 550 and at the same time be rejected with a score of, say, 625! The score at which you get approval is a ‘good’ FICO score!
Ensure that all your bills are paid in time and you do not fall behind on your credit payments. Try to maintain your FICO score as high as possible. Start working on improving your score about 6 to 12 months before you apply for a loan.
The higher your FICO score the better your credit health!
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