Credit Score: 

If you are considering buying a house, make sure your Credit score is in the green before applying for that loan…

 What is a Credit Score? 

A Credit Score is basically just a number (a very important albeit) in the USA that is used to check the credit worthiness of a person. It is based on the analysis of the credit report of the person. Credit Score is used by banks and other lenders to evaluate their risk and deciding the limits when they approve your applications. So if you have been paying your bills on time without defaulting, your Credit score will most probably be good. 

Credit scores are not permanent, i.e. if you find out that you have a poor Credit score, you Can change it if you are more careful with your credit from now onwards. Apart from Credit Score, there are a variety of third-party scoring systems like FICO, Nextgen, VantageScore  etc. which are also used to do the rating.

 What’s a FICO SCORE?

 FICO stands for Fair Isaac & Co. who developed the first credit scoring system i.e. the FICO score. It is the most popular and widely used credit score model nowadays and it would certainly do you good if you had  an idea about yours before applying somewhere.

Range of Scores:

The FICO score may lie between 300 and 850.  The median score acc. to Fair Isaac is 723 which is updated constantly. Mostly the scores lie between the 65 to 799 range.

What Comprises these Scores?

 The exact makeup of these scores are usually closely guarded but Fair & Isaac have given out an approximate break up:  (Source: www.wikipedia.org)

• 35%: punctuality of payment in the past (only includes payments later than 30 days past due).
• 30%: the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
• 15%: length of credit history
• 10%: types of credit used (installment, revolving, consumer finance)
• 10%: recent search for credit and/or amount of credit obtained recently

Free annual credit reports : 

Thanks to the FACT Act (Fair and Accurate Credit Transactions Act), every U.S. resident is entitled to a free copy of his or her credit report from each credit reporting agency once every twelve months This information is available at annualcreditreport.com . 

BottomLine:

A poor Credit/FICO score can hurt you big time, so  : pay your bills on time and keep down that debt column. Be a good candidate and keep your borrowing in check and in limits. Check out the free report to which you are entitled regarding your credit worthiness.