One of the most worrisome numbers that people deal with on a daily basis is probably one that they understand the least: their credit score, or FICO score. Falling somewhere between 300 at the worst to 850 at the best, your credit score can (and will) affect some of the largest financial moments of your life, determining interest rates, credit card approvals, and even whether or not you can get an apartment.
But what is the FICO score?
Generally speaking, your FICO score is a rating of how trustworthy you are with money, from the point of view of the lender, and is very important—largely because, without a credit score, a lender doesn’t know you from Adam. The score is the result of an algorithm put together by the Fair Isaac Corp. (aka FICO).
So what goes into the algorithm?
There are a number of factors that affect your score. The largest of these (at about 35% of the total) is your payment history, or whether, on past loans, you have consistently kept up with payments without the loans becoming delinquent. Slightly less important (but still important by a large amount) is how much money you still owe on current loans, making up about 30% of the score. The last third is a combination of how many new credit lines you have opened or looked into recently, the age of your debts, and the number of types of credit you have.
Overall, the more you keep up your score by consistently paying down your active accounts as quickly as you can, the better it will be. Have questions about credit score? Contact our Finance Department and we’ll be happy to help you out!