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The Most Important Score of a Lifetime

By Janet Lacey
Published: Sunday, December 6th, 2009

If a credit report is a story that financing companies use to assess the credit worthiness of an individual, the FICO score is the numerical equivalence of the report. The FICO score was named after the Fair Isaac Corporation. This corporation pioneered the translation of the narrative report to a more understandable measurement which is numbers. The FICO score is made up of scoring intervals that segregate the investments and liabilities to the company by bracketing them to groups.

The score of 700 and above is the on going rate for a good credit investment. An individual who can get hold of a score between this interval in assured of getting credit agreements at the lowest interest rate and at the fastest time period. On the other hand, getting the score from 500 and below is a numerical representation that the holder of the score is a liability rather than an investment.

FICO scores are also known as credit scores. As said before these scores are the measurement of the probability that the individual will lose out on a loan or in a credit card account. It is a measurement of the risks that the financing companies will take if they opt to invest on someone by giving him or her loans and credit accounts.

Being risk pooling companies, these companies would gauge the interest rates and time constraints of the loan on the risk assessment they can get from the credit scores. Just like their narrative counterpart, these scores also come from the three major credit bureaus which are Equifax, Experian and TransUnion. These credit bureaus insure that the score will coincide with the report that they have documented. It is safe to assume that the credit scores and reports imply the same grounds and bear the same weight in the eyes of financing companies.

The credit score is computed using the same reports’ considerations such as credit history, recent late payments, gravity of late payments, personal information and frequency of late payments. These considerations do not have the same weight in terms of affecting the score. The factor of credit history bears most weight in the computation of scores. Financial records will last for seven years if uncontested by the credit account holder. This means that an individual’s score will be affected by a negative record entry for the next seven years. Knowing the nature of credit bureaus, the negative entries would bear more weight as opposed to positive entries.

In the long run most credit account holders make their credit scores lower by neglecting simple things that they commit everyday such as taking the payment deadline for granted or opening multiple accounts. Most credit account holder also made it a habit to open multiple accounts to avoid consuming the credit limit of their existing credit card account. This is committed by credit account holders without knowing that their action will cost them long term effects. In doing this, they appear less credit worthy because of the inability to maintain a single credit card account.

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