Understanding My FICO Score | Credit

By RichardLakin
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Knowing your credit score is an important thing, but that knowledge is absolutely useless unless you understand what the score means. If you don't have knowledge of how to increase credit score, you will never be able to compete in a financial world that requires credit. All of the financial and credit-related decisions that you make combine to create your credit score.

When you take a look at your credit FICO report score, you will see that things like your use of a secured bank card or a portable mortgage will impact how the generic scoring models calculate your score. Both positively and negatively, the things you do can impact your credit report FICO score and Experian FICO score for a long time.

Credit Cards and My FICO Score

As you probably know, credit cards have a big impact on your credit score. Irresponsible use of credit cards is the thing that sends all three credit scores into the dump. From the FICO Experian score to the other credit bureau scores, the impact is huge when it comes to credit cards.

This is because your credit cards require constant attention, each and every month. For the majority of consumers, the payment amounts are going to be small, but they do require attention.

With that in mind, consumers have a chance to positive impact their FICO free score with their credit card use. When consumers come in and ask "how to raise my credit score", the majority of credit repair clinics will tell them that getting a small credit card and paying the balance each month is a great way of fixing credit score problems.

On the other hand, credit cards are responsible for many people's financial problems. It is amazing the volume of people who complain "credit cards killed my FICO score". Your score decreases every time you either miss a payment or make payment late.

Your credit score can significantly drop because of one or two missed payments in the past. Also, the credit amount on the credit cards is also significant.

If you have too many credit cards (anything more than three), then you will be seen as something of a credit risk for lenders. It is always best to only have a couple of cards and use them as responsibly as you can.

Loans Affect Your FICO Score

Each of the many types of loans affects your credit scores in different ways. It is vital to maintain your loan payments in order to raise your FICO for any of the three major credit bureaus. Creditors like to see stable kinds of credit such as a student loan or mortgage. Your ability to manage and pay your stable credit loans successfully will be reflected in credit bureau data and is a great way to prove your creditworthiness to lenders.

The other side of that has to do with the size of these loans. Mortgage loans, in particular, are large loans. If you do happen to fall behind on one of these or you happen to go through voluntary repossession, then your credit score will take a major hit. My FICO score is strong because of a long standing mortgage loan, but I'd shudder to think of how low it would go if I were to default on that loan. In addition, consumers would be smart to keep track of personal loans like they do a credit card. These loans are much more unstable and if you lose track of them, your FICO credit score will struggle.

My FICO Score Can Be Altered By Credit Inquires

Unknown to many people is the fact that each and every time they apply for a credit card or for a loan of any kind, it will appear on their credit report. No matter whether they are approved or denied, consumers' FICO score can be affected simply by filling out the paperwork. It's not worth the free t-shirt being offered if you apply for a new credit card that isn't actually necessary. Applying for numerous loans indicates instability and causes your FICO score to drop as a result.

Being turned down for a credit card or loan is even more detrimental to your credit score. When you are rejected for a credit card, it hurts your score a little bit more than an inquiry does. If you are turned down several times, your rating will drop 20 points or more.

My FICO Score and Credit Balances

It is not good to use up all of the credit on your credit cards. As a general rule, if you are using more than 50% of the available credit on a card, then your score will take a dip. This is especially true for larger cards, where those balances are even more substantial. Card credit FICO score consequences are serious, and they are often overlooked.

Carrying a small balance on a credit card is a good thing, because it allows you to establish a positive re-payment history each month. When you start using up all of the credit at your disposal, you become a credit risk. In the end, that is really what my FICO score is intended to do. It lets lenders know what sort of risk level they are dealing with, so they can make the appropriate decision.

The Serious Stuff

While missing payments and having high balances will impact your credit score some, nothing will hit it harder than serious things like tax delinquencies, bankruptcy score filings, repossession of your property, or a serious loan default. If you are forced to go through bankruptcy, then you can expect that the next time you use a FICO calculator, your score will be in a very low place.

The FICO score range for people who have gone through these things is usually 500-600, which makes it very tough for those folks to get a loan. If you have gone through one or more of these serious credit instances, it is usually a good idea to consult credit repair firms to get an idea of the fight you have in front of you.

About the Author

Your credit score can hold a lot of information that agencies look into before granting you that loan. Learn how MyFICO score can affect the outcome of their decision based on your FICO score.

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