Credit Scoring

Understanding FICO SCORES

• FICO scores are your credit rating
• Most lenders base approval on them
• They range from 300-850, higher is better
• Higher scores mean lower interest rates

FICO scores are calculated based on your rating in five general categories

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What actions will hurt the score?
• Missing payments (regardless of $ amounts… It takes 24 months to restore credit of one late pay)
• Credit cards at capacity (i.e. maxing out credit cards)
• Closing credit cards out
• Shopping for credit excessively
• Opening up numerous trades in a short time period
• Having more revolving loans in relation to installment loans
• Borrowing from finance companies
• Transferring Balances
What doesn’t affect the score?
• Debt ratio
• Income
• Length of residence
• Length of employment
• Criminal Record or Personal Information
Approximate credit weight for each year.
• 40% = current to 12 months
• 30% = 13-24 months
• 20% = 25 – 36 months
• 10% = 37+ months
How to improve the score?
• Pay down on credit cards
• Do not close credit cards because capacity will decrease
• Continue to make payments on time (older late pays will become less significant with time)
• Slow down on opening new accounts
• Acquire a solid credit history with years of experience

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