The world of finance can be tricky. If you do not what you are doing, you might end suffering from negative consequences as a result. If you think that delaying payments on your bills and skipping credit card payments will not affect you, then you are very wrong. If you think that applying for one type of credit in a short span of time will affect you, again you are wrong. These are just some of the actions that can have a negative impact on your FICO score.
What is a FICO score? Why is it important? FICO score is a type of credit score that lenders use as basis when making decisions regarding loan or credit applications. Lending institutions have three sources for these FICO scores. A FICO score is important because this will determine whether your will have a hard time applying for loans and credits or not. Those who are aware are aiming for a higher FICO score. Those who are unaware of its importance often discover that their FICO scores are at rock bottom. In other words, your credit health is reliant on your FICO score.
Every lending company has their own FICO score chart. Therefore, it would be impossible for you to lie about your actual score. Moreover, they also hold all the records of your previous transactions and your records on how you handled your credits.
A FICO Score Range is often used to group individuals with a specific FICO score. This will make it easier for lenders to determine, which group has a low credit risk and which group is having a hard time keeping themselves financially afloat.
However, the question still remains, are FICO scores really helpful? Can you benefit from maintaining an above average FICO score? The answer to these questions is, yes. Here are three of the main reasons why FICO is helpful.
· Application for loans or credit is faster with the help of the FICO score. Since FICO scores do not take time to be retrieved, lenders can now process applications faster than they used to. Moreover, the scores make it easier for them to decide whether to approve the application or not. If you have an above average FICO score then you can expect your application to be approved in less than 24 hours. This is also the reason why it is now possible to process applications online.
· FICO scores help eliminate the role of discrimination in loan or credit application. Long before the use of FICO scores lenders tend to base their decision on the race, age, sex, religion, marital status, and other personal details of the applicant. If any of these details do not coincide with the lenders preferences, he or she might reject the application. In FICO, these details are not included. Therefore, it will not affect or cause bias in the lenders decision.
· FICO scores do not stick with the past. Delinquent payments have less impact when it gets older and as you create better payment patterns at present. Moreover, FICO scores do not put a lot of weight on the past, but instead it weighs it against your current performance.
A free FICO score can also be obtained. This can be useful if you want to know your FICO score, and help you decide on the course of action that you can take in order to improve it.