Before we discuss the FICO score and its features, it is important to know about the category which it belongs to. This is basically a type of credit score. Credit scores are points that are of utmost importance if you are going to apply for a loan or putting an application for credit card approval. Your credit score matters a lot in such matters. There are a lot of varieties in credit scores and FICO is one of them. It is developed by the Fair Issac Corporation. The company which is lending the money checks the borrower’s credit score and then decide whether it should provide money to the particular borrower or not.
If we talk particularly about FICO scores, then there are a lot of factors that are considered while calculating it. If the total FICO score of a person is 100, then 35% of it comprises of payment history, 30% is comprised of accounts owed, 15% for a length of credit history, 10% for new credit and 10% for credit mix. Let us discuss all these factors in detail.
- The first factor is the payment history of an individual. Now, figure out the payment history of a particular person, the lender checks, whether the person is doing his payments on time or not.
- Another important factor is the accounts owed. This refers to the history of the loans that the particular individual has taken. If there are too many debts, then that is considered as a bad account.
- The length of the credit history refers to the age of the old and new accounts along with its average.
- The last two factors are the credit mix and new credit. It refers to the variety of accounts and the newly opened accounts, respectively.
With this discussion, it is clear that the working of FICO scores is quite easy to understand. Thus, if you decide to use it, your credit score will always be on the top.