In today’s tight credit market, Fair Isaac Corporation (FICO) credit scores have become increasingly important to buyers of real estate here locally here in Silicon Valley as well as nationally. A low FICO score can mean the difference between purchasing a home and not qualifying. Unfortunately, most of don’t pay much attention to our FICO scores until we need credit for a major purchase like a home or automobile. FICO scoring however impacts any type of consumer lending in many ways – most importantly by affecting our ability to obtain the most favorable interest rates and loan terms or if we score too low, our ability to qualify for credit at all.
FICO BACKGROUND American High School trailer
So WHO is FICO anyway and how does what FICO has to say about us effect our ability to obtain credit? FICO a.k.a. Fair Isaac Corporation was started by engineer, Bill Fair and mathematician, Earl Isaac in 1956 as a management consultant services company. In the course of their business they began working on a credit scoring system in 1958. Their FICO credit scoring system was launched in 1970 as a method of determining credit risk and quickly made available to all of the major consumer credit reporting agencies in the United States and Canada including Equifax, Experian, Transunion and PRBC. The FICO scoring system is probably the most widely used credit scoring system in the world.
FIVE WAYS TO IMPROVE YOUR SCORE
At a recent Palo Alto Board of Realtors meeting, a Certified Credit Specialist offered the following tips on how to improve your FICO credit score:
1. Balance your debt evenly
among 3 to 5 credit cards.
2. Never carry a balance of more than 30%
of your available credit on any one credit card
3. Always pay on time to avoid any delinquencies
4. Old credit is stable credit, so don’t close your old credit cards, keep them and use them occasionally
5. Try to limit inquiries on your credit. Soft inquiries like those to check your own credit or credit checks by employers don’t count, but any inquiries made by lenders particularly credit card companies can reduce your credit score. Home and automobile lender credit inquiries seem to not hurt as much because most people shop for the best rates on those types of loans.
FICO scores can range from 300 to 850. Right now, the magic number is 750 for purposes of obtaining the best credit terms. A higher score is good but won’t make a significant difference. On the other hand a credit score of less than 620 can make it virtually impossible to qualify for a loan.
CREDIT SCORE DATE
Another way to improve your credit score is to make loan and credit card payments 5 to 10 days before you credit score date. Apparently all of us have a credit score date – like a birthday, that we can obtain from the credit bureaus.
FREE CREDIT REPORT (OR NOT SO FREE)
You can check your credit for free online (though it will costs a few dollars to actually see your score) at www.AnnualCreditReport.com and obtain your credit report for free. It only takes a few minutes and you can even make adjustments and changes online too. Don’t get it confused with FreeCreditReport.com, which acutally is NOT
free.
CREDIT COUNSELING The Square Peg psp
If you know of anyone that needs credit couseling, contact us
with their name and number and we would be happy to have the opportunity to serve them with a free credit counseling session.Species III
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