FICO Scores and Credit Risk

FICO, originally Fair, Isaac and Company (now known simply as FICO), is an information analytics firm based in San Jose, California specializing in credit monitoring services. It was founded by Earl Isaac and Bill Fair in 1956. Their FICO score, an independent measure of customer credit risk, has since become a staple of personal lending in the United States. FICO provides lenders with a fast but non-intrusive way of evaluating a borrower’s credit-risk profile. In other words, it tells lenders how likely a borrower is to default on debt. While many experts believe that the overall effectiveness of FICO has been exaggerated (many credit-reporting agencies, including Equifax, Experian and TransUnion, disagree), lenders have always used at least some measure of FICO in their credit decisions.

A unique feature of FICO is the number of factors it assesses to come up with its final score. FICO uses a complex combination of several separate factors to arrive at the final score. These include both the number of open lines of credit and the number of revolving accounts, the amount of debt held by borrowers, the likelihood of a consumer filing a claim and whether the consumer pays bills on time. The higher the FICO score the better off a consumer will be financially.

By looking at an individual’s credit history and varying other factors such as payment habits, assets and income, FICO can calculate a consumer’s FICO score. However, many consumers are not aware that they are able to request their credit reports under a different name if they want to. This means that there may be misleading or erroneous information on FICO reports. Consumers can order their credit reports under the name” guidestart”, “fico,” “guidestat,” “recovery” or “recover.”

Once a consumer has ordered their report under any of the names mentioned above they can look over the credit score range to see which areas need to be improved. If the consumer has found inaccuracies in their report that are lowering their credit score they can dispute the information with the lender or reporting agency. However, if the consumer is only trying to access their credit score range because they want to apply for a loan or other type of credit, they do not have the right to dispute inaccurate information.

There are three major credit bureaus from which to obtain a copy of FICO. Experian, Equifax and TransUnion all offer the service. After applying, reviewing and signing up for an account, consumers can see their score on their credit report within one week. The scores are then updated every six months at the same time the consumer is applying for a loan or other form of credit. This makes it easier for people to determine their score in real time. The credit score ranges and the risk score are much more closely linked to one another than one might think.

In order to determine your credit scores you should check them frequently. Each credit scores will be different due to the way that lenders have calculated them. For example, a creditor that updates the length of time it takes to make a payment will end up having a higher or lower FICO score for that particular period of time. It can be important to maintain a good FICO rating if you are looking to get credit of any kind.

Once the consumer has established the areas of credit scores, they are unhappy with they can take steps to correct them. For example, those who know that they have low FICO ratings can take steps to improve their rating. It may be possible to reduce the number of late payments that they have or work to improve their credit scores in some other way. In some cases, consumers who know about the problems with their credit report may find that it changes enough to lower their FICO risk scores. Sometimes it is a combination of things, as FICO scores will change based on the amount of activity on an individual’s accounts.

Those consumers with higher FICO scores in the 670 to 739 range may find it difficult to get mortgages or other types of loans. When they do, they often pay less for the house or have special financing arrangements. Those who have lower FICO scores are more likely to be rejected on mortgage applications or have a higher interest rate because lenders perceive them as high risk. Because they have bad credit, some people avoid buying new homes altogether. For those who own a home, the FICO score ranges can make or break the chance to own a home. TGS Financial System is a credit management app that can help you keep tabs on your credit score weekly and monthly. You can download this app now on Android or Iphone.