A good Credit score is looked upon as an important criterion for banks to lend loans to borrowers. There are certain parameters which are used to give a credit score to an individual. So what is a FICO score? FICO score is one of the most important factors helping the lenders to decide on extending loans to the individuals (or borrowers) with a high FICO score.
FICO or Fair Isaac Corporation can be defined as the number between 400 to 800 ranks credited to borrowers according to the algorithm based on Fair Isaac Corporation. Here, 400 is the least score and 800 is considered as the highest score.
The major US credit bureaus’, like Experian, Equifax, and TransUnion, use this proprietary tool to score credits to borrowers.
Benefits of a good credit score
- People holding 800 FICO score on them are eligible to receive home loans with the least interest rates in the country. The reason behind this is the banks’ faith on the borrower of not defaulting on loan repayment.
- Apart from qualifying for lowest interest rates, the borrower can get special discounts in the form of various insurance plans.
- Individual with high credit score is acknowledged by the banks as they offer the individual with Premium Credit Cards via mails rather than the individual personally visiting the bank premises for this facility.
- Another observation with credit score rating is employers checking these scores before hiring potential employees.
Ways of improving the credit score
- Achieving high credit score is correlated to regular bill payments, as late payments arising due to irregularity can deteriorate your credit rating in the long run.
- While using credit cards, one should try to keep the expenses low or keep the balances low, as any card usage reflecting balance of 35% or more can be hazardous for the user and thus lower his/her credit score.
- Many of us tend to open multiple accounts with various banks and end up not using all the accounts. It is advisable not to close the unused accounts and maintain a long relationship with different banks and thus earn a positive history. A positive credit history takes one to achieving a good credit score.
- Nowadays, the general trend is different retailers offering credit cards announcing good deals on such cards, however, one should not always fall trap to such offers and before applying for such cards one should read the offer documentation very carefully and should have a clear understanding of the offered interest rates.
- Separation after marriage may be painful, but it is also advisable to separate your bank accounts if you’re separated from your partner.
- A regular observation by experts reveals that most of us do not review our credit reports we are holding since a long time. It is important to keep a track of the long-standing credit reports and correct the inaccuracies, if any.
- Many people tend to apply for credit cards from different companies on a regular basis. Any request for applying for the credit cards is followed by background inquiries from the respective banks or creditor. And if such inquiries are too frequent, it gives a blow to the credit rating as a whole.
- Filing bankruptcy may seem to be a convenient option for people applying for home loans, but if you are looking forward to improve your credit rating, you should not consider filing bankruptcy in any situation.