The FICO Score Gets A Makeover
Author: HalJames Total views: 19 Word Count: 365
People often worry about Big Brother watching us, but don't give a second thought to their credit record. Well, your credit history is the foundation of many things impacting your life. In fact, your financial profile can be boiled down to a FICO score.
So, just what is a FICO score? FICO is an abbreviation for Fair, Isaacs and Company, the business that came up with the calculation. Your FICO score reflects a calculation of various elements on your credit score ranking from the type of debt you have to payment histories.
Any person borrowing significant funds has run into their FICO score at one point or another. You might think you know everything there is about the FICO, but you don't. This is because the calculation just changed.
FICO has always been criticized for being a bit unforgiving and structured. So, do the new modifications change this? Well, the issues being focused on are really more oriented towards the weight of certain events.
Historically, even one missed late payment could really hurt your FICO. The value given to one late payment was so high, that there was little difference between the score of a person who missed just one payment deadline and a person who missed many.
Fair Isaacs appears to have taken this one late payment criticism to heart. The new calculation process does not hammer a borrower who has one late payment. On the other hand, it reduces the FICO scores of multipayment problem borrowers even more.
Another change is the removal of the old authorized user trick. To help build up credit scores, people would often authorize another person. This was meant to be done from parents to kids, but was exploited heavily. It has now been removed.
The length of time you have had credit is now also given more value. This is apparently because the longer the record, the clearer the picture on what type of borrower you are. Open credit accounts early whenever possible.
Whether you are just looking to get a credit card or something larger like a car loan or mortgage, your FICO score is going to play a big part in the process. Make sure you know what it is before you apply.
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About the Author
Hal James writes about balloon mortgage home loans for FSBOAmerica.org.
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