What is FICO and what is its purpose?
A FICO score is an important calculation that may determine whether you are eligible to receive credit. A FICO, or a credit score, is a numerical score which is based on the financial history of an individual as collected in his/her credit report. If you fail to understand the effect of this score on your future lifestyle and purchasing power, it may be highly disastrous. Creditors may use the FICO score to assess whether or not you will be able to pay the loan back within time. The higher the FICO score, the more liable you are to pay back your loan on time.
Credit scores evaluate the credit history of borrower considering several factors such as late payments, the amount of credit available vs. the amount of credit used, and negative credit information such as collections, charge-offs, bankruptcies, etc. Your FICO score is divided into five general categories such as payment history, amounts owed, length of credit history, new credit and types of credit used. Your payment history comprises information on retail accounts, credit cards, finance company accounts, installation loans and mortgages you may have had. You will also find information on bankruptcy as well as other useful information about your credit history.
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