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Credit Report & Credit Score; Credit Repair, Debt Management > Credit Score > Wanting to be a low risk credit applicant? Know your FICO score

Wanting to be a low risk credit applicant? Know your FICO score

By Ruth Racey
Published: Monday, November 23rd, 2009

Next time you receive your credit history report, try paying attention to the three-digit number which you should remember, especially if you are planning to purchase anything using credit soon. This number is known as a FICO score. (FICO stands for Fair Isaac and Company; it is a company which began to develop credit-scoring systems during the 1950s.) FICO people boasts that they use 30 different factors that help determine a consumer’s score; however, they refuse to reveal the exact formula for coming up with these scores.


Credit scoring, as what FICO does, uses the client’s credit history to determine their capacity to pay loans. Scoring has been used by many companies for years because it helps them categorize borrowers quickly. A high FICO score means that the client is a low risk consumer, while low scores imply that the consumer is high risk. Low risk consumers have more financial stability, so they would only receive a surface review by the potential lender. Meanwhile, high risk credit clients have less chances of meeting payment periods, thus, possible lenders often deny their application.


Possible FICO scores fall somewhere between 300 and 900, but most consumers’ scores range from 500 to 800. If you got a score in the 500s, you have a problem because you are already considered as high risk. Scores in the 600s are considered the average scores. You will be required to present your payment history, and written papers explaining your failure to pay past loans before they issue any credit. Most lenders would not accept someone who has a FICO score of 640 or less, but a score of 680 or higher would mean low risks for the lender and lower costs to the applicant.


To understand why you got a certain score, FICO provides four reason codes in each report. These codes are the primary factors and reasons for your score, so it is on your part whether you will fix them or not.


Here are some factors which affects your FICO scores:

  1. Delinquencies.
  2. An unreasonable number of accounts opened within a year.
  3. Insufficient credit history and/or no recent credit balance.
  4. Credit account balances are near the limit.
  5. Public financial records, such as tax liens and bankruptcies.


FICO scores do not solely determine whether you are going to be accepted by a loaner or not. There are also other factors that could affect underwrite decisions. Here are a few examples: Paying a larger down payment, a successful background in saving money, and/or, low debt-to-income proportions and/or previously paid loans with present lender, and/or availability of assets or other collateral.

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