FICO® scores tell a lender how big of a credit risk you might be, and how likely you are to make timely payments if you’re granted a form of a credit, such as a credit card, mortgage, or personal loan.
How are FICO® scores Determined?
Most banks and lenders use FICO®scores as their primary way to make credit issuing decisions. It takes several factors into account when determining what your score is, including:
- Age of credit accounts opened. Have you had several credit accounts opened for a long time, or just one or two for a few months? Making timely payments on an account you've had open for a long time can definitely improve your score.
- Debt relative to credit limits. This is how much of your available credit you're currently using. For the purposes of keeping a strong FICO®score, keep this number below 30%.
- Having more than one type of credit. If you have an installment loan (such as an auto loan or mortgage) and revolving credit (like a credit card), this can actually help your score.
- Payment history. Late payments on any account can adversely affect your score. If you have a credit card you're trying to stay current on, be sure to at least make the minimum payment every month.
- Recent credit applications. Try not to apply for several lines of credit or credit cards in a short amount of time. A “hard inquiry” showing up on your credit report will ding your score almost immediately, in some cases. If you apply for a new credit card, for example, it's a good idea to wait six months before applying for another – even if your application is denied.
Understanding Your FICO® Score
FICO® scores range between 300 and 850. For most lenders, anything above 700 is considered good to very good, and should help to qualify you for a mortgage or car loan. In contrast, a score below 620 can make it extremely hard for the borrower to find credit at decent rates.
To calculate scores, the breakdown by each category listed above goes like this:
How to Check Your FICO Score ®
You can request a free copy of your credit report at this website. Or, you can check your FICO score® within Online Banking every time you log in. Just click the link in the far-right corner of the dashboard that looks like this: