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What's in a FICO Score?

 

FICO is the acronym for Fair Isaac Corporation, a publicly-traded corporation (under the symbol "FIC") that created the best-known and most widely used credit score model in the United States. The FICO score is calculated statistically, with information from a consumer's credit files. The FICO score is primarily used in credit decisions made by financial institutions in issuing secured and unsecured credit. Institutions using such scores as a factor in their lending decisions may deny credit, charge higher interest rates, demand more collateral, or require a co-signer if the applicant's FICO credit score is low. Although Carolina Foothills is member-owned, we still have an obligation to our members as whole to make prudent loan decisions, which will protect everyone’s financial stability. While the credit score is not the only determining factor, we do use the scores as one of the factors in making loan decisions.
 
So, what makes up the score?
·         35% of the score is based on payment history. If a payment is missed regardless of the dollar amount, it could hurt your credit score;
·         30% is the amount you owe. Items that could hurt you here are having your credit card at capacity;
·         15% is the length of time you’ve had the credit. So, if you close out credit cards, this lowers your available capacity, which can lower your credit score;
·         10% of the score is attributed to new credit (last 12 to 18 months). If you shop for credit excessively or open numerous new accounts in a short period of time, it can hurt your credit score;
·         10% is the types of credits used. If you have more revolving loans in relation to installment loans or you are borrowing from finance companies, those things can hurt your score.
 
How can you improve your score? The following will help boost your score:
·         Pay down credit cards but do not close the account because that will decrease your capacity;
·         Continue to make payments on time. Older late payments will become less significant with time;
·         Slow down on opening new accounts;
·         Move revolving debt to installment debt;
·         Keep debt to a minimum;
·         Work toward having a solid credit history with years of experience.

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