What is a FICO Score and Why Should You Care?
December 23, 2011 by Timmy Morre
Filed under Finance
A FICO score is a number between 450 and 850 that is suppose to represent your ability to pay back credit. But what exactly is it and how does it affect you?
A FICO score is an indicator that tells others just how likely it is that you are going to pay back any debt that you may have. It looks at things such as how well you have paid your bills in the past, how much debt you currently have and how easily you can pay that debt.
Banks look at credit scores as a way of measuring risk and how financially responsible you are. A FICO score over 700 indicates that you are very likely to pay back any debt or bills that you take on. A FICO score below 600 on the other hand indicated that you are very likely not to pay back any debt or bills that you take on.
How in the world does this affect you and what would be the purpose of keeping it high? The biggest reason to keep your FICO score as high as possible is that everyone looks at it.
If you want to buy a house and do not have $100,000s lying around you will have to go out and get a loan. If your FICO score is really bad then you will find it hard to get a loan and if you do find a loan with a bad FICO score it isn’t going to be on favorable terms.
Also if you want to rent an apartment or a house your landlord will be looking for indications that you are responsible and that you will repay them. The best way to do this is through the FICO score.
A FICO score really does affect the quality of your life because anyone looking to enter into a business agreement with you will have access to your score and statistics. This means that the higher the score you have the better off you will be. It is just easier to keep it as high as possible.
For ways to rebuild credit visit Shaun’s article on build a credit history. This article, What is a FICO Score and Why Should You Care? has free reprint rights.
