What is FICO score and Importance of checking your FICO score

The abbreviation "FICO" stands for a credit scoring system developed by the Fair Isaac Corporation. This credit scoring system is used extensively by the loan industry, and supplies raw scores to Equifax, Experian, and TransUnion.

The firms' scoring systems use similar data to compute their scores, but all models are a bit different. Consequently, a high score in any of these will be reflected in the other systems, but differences will be noted. FICO score ranges are from 300 to 850, where 850 is a maximum score, indicating excellent creditworthiness, and 300 is a dismal score. Late payments on credit, failures to pay, and excess number of credit lines are some of the factors that can damage an individual's score

All the companies in the credit rating industry give ratings that represent the likelihood of the borrower being unable or unwilling to repay. The lower the score, the higher the risk to a lender. When a potential borrower enters the market, the credit score can be a make or break decision. Further if the loan is approved the score based on the borrower's history strongly influences the interest rate to be charged that customer. Low advertised credit card interest rates may turn out to be less attractive.

The importance of checking your FICO score cannot be overstated, as many decisions by the lender can come late in the process of obtaining a loan. As an example, your FICO score may make you ineligible to obtain a particular credit card. The actual rate at which you will be able to establish your credit card from a particular lender may discourage you from making an application that you contemplated.

You will need to understand the importance of your FICO score and check your score right before making decisions. Most lenders will regularly advertise a particular lending rate. The advertised rates are frequently based on the borrower having a maximum 850 FICO score. This is the reason that many people experience credit rate offers that are not as attractive as those advertised.

Knowing your FICO score and the importance of your score to a lender can better prepare you for the accurate cost of carrying credit card balances.