FICO (Fair Isaac Corporation) is the credit score created by Fair Isaac Corporations in 1956 and is standard credit scoring system in the United States. FICO credit scores range from 300 to 850. The higher the score the less of a risk. Equifax Experian, Trans Union are three major credit bureaus. Your credit report details money you have borrowed as well as your payment history from a variety of financial institutions, including credit card companies, banks, mortgage companies and other lenders. Let us not forget, telephone and utility companies report information to credit bureaus.
Your credit is important for several reason. Credit history determines the type of loan you qualify for and the interest rate you will receive. You may not get that dream house or car you want due to high interest rate because of bad credit. Some jobs may not hire you because of your credit score.
According to FiscalGeek.com,
- 35% of your Credit Score is devoted to Payment History.
- 30% of your Credit Score is based on Utilization
- 15% of your Credit Score is impacted by your Credit History
- 10% of your Credit Score is based on Inquiries.
- 10% of your Credit Score is determined by Types of Credit
How to build my credit:
- Make payments on time
- Keep credit card debit low
- Stay under your credit limit
The length of time items remain on your credit
- Bankruptcy: Ten years from the date of filing for Chapter 7 filings, seven years for Chapter 13 filings and seven years for each record marked as “Included in BK”
- Charge-offs (when a creditor or lender writes off the balance of a delinquent debt, no longer expecting it to be repaid): Seven years
- Closed accounts: Seven years if the account was paid late, no expiration date if the account was always paid on time
- Collection accounts: Seven years from the last late payment on the original account
- Inquiries: Two years
- Late payments: Seven years from the date of the late payment
- Judgments: Seven years from the filing date if paid; longer if unpaid
- Tax liens: Fifteen or more years if left unpaid, seven years from the date the lien is paid
Always check your credit. Checking your credit helps identify any errors and keeps you aware of your score.
Contact the big three credit bureaus to obtain your yearly free credit report.
Trans Union: http://www.transunion.com