Credit Score – what is a credit score?

One of the most important information in a credit report is the credit score. The FICO (Fair, Isaac and Co) score is the single best score that reflects one’s credit worthiness. This score gives the lenders a prediction of the risk involved in offering a loan or a mortgage. Credit score has a value from 300 to 900 and if one has a score of 650 and above, the risk is considered to be less and hence the applicant of a loan has a high probability of being accepted by the lender. The higher the score the better it is for anyone.

What factors determine the credit score?

•  Past history of credit repayments

•  Extent of utilizing the credit limit in the past. For example, if a person has been set a limit of say, $ 5000 on a credit card and if the person always has outstanding dues which are almost close to the limit, then the person is considered risky.

• Number of years a person has had a credit. More the years, better the score.

• Frequency of loan applications. If a person applies for loans often, he may have a less score.

There are other factors also the FICO system considers before calculating a credit score for a person. If you are looking for a mortgage and if you do not have a favorable credit score, it makes sense to build credit worthiness before requesting for a loan.

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