The auto dealership, mortgage bankers, and credit card companies are the main money lenders and they strictly evaluate one`s credit worthiness from the FICO and credit scores as reflected by the credit report. Landlords, employers, and Insurance companies also find it worth to rely on the credit scores in the determination of financial worth of creditors. Therefore, there is a strong need of maintaining a good credit in order to secure a mortgage or a loan for financial support. In order to maintain and acquire good credit score, you need to understand the following component and their impact on the FICO and credit scores.
Credit history
Credit history contributes a rough estimate of 35{1e9709ef5f3333ae7d8fe6a31af5d3933317716445c13c35f37bf4f9d8e83538} of the FICO or the credit score. The credit history determines whether on one can be trusted to repay any money with the speculated time. The scores are calculated from the herein considerations:
- Has the debtor paid all the bills on time? Timely repayment reflects positively while the late payment has an adverse effect on the FICO scores.
- Does the debtor have liens and judgment regarding the debt settlement? Bankruptcies, wage attachments, and charge-offs have significant influences on any individual`s credit history.
- In case one paid late, the credit scores figures reflect how late the repayment was made. The earlier the repayment the better the credit score and vise verse.
The amount of credit:
This is the second most determinant of credit scores. This is calculated by dividing the amount of debt owed by the amount of unutilized debt. The figure is very crucial in determining the trust of the borrower. This is a bit tricky since the financial credibility cannot be determined in case one does not owe any credit.
The scores are also determined by the type of accounts since the creditors might need to verify that the borrowers are stable enough to fully manage different credits. The more the accounts, such as the auto loans, mortgage, installment and credit cards the high the credit scores.
The credit history length
The reflect credit score on the credit report also takes the consideration of how long has one been using the credit. The average score of the all the account is used in the determination of the length of the credit history.
The longer the history (though not marred by late repayment) has a stronger positive impact on the credit scores than a short time history. A short history is only beneficial if the one has zero or minimal records of late payment.
The types of the credits and their repayment
The credits that have fixed due-date and fixed amount are weighed more in the calculation of the FICO score. These types of credit payments include the student loans, auto loans, and the mortgage payments. Violation of due dates on the above credits indicates financial hardship or carelessness and hence have a strong adverse effect on the credit score.
Therefore if you are using the magnetic credit stripe card you are very likely to affect your FICO score since the fraudster may borrow money using your account data. This is so since there accession of the holders account data is easier than the EMV card account detail. Magnetic card stripe information
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