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Free Fico Score

Credit score, in its very simple terms, is the rating designed for grownups to assess their financial status and aptitude. Higher scores tend to suggest better creditworthiness for the person being rated; lower scores, on the other hand, carry associated risks to the person in terms of the likelihood of being able to pay his debts. Banks, insurance companies, lending institutions, and, possibly, employers make use of this score as part of their background checks to the individual in question. The goal, therefore, is to achieve a good credit score and this is made possible by first doing a self-assessment and knowing one's rating. Getting a free FICO score is ideally the first step.

What is FICO?

FICO, which stands for Fair Isaac Corporation, refers to the public company that provides services such as credit scoring and other financial analytics. The purpose of which is to assist financial services in arriving with informed decisions and strategies typically in large-scale scenarios. One of their most useful services is credit scoring and their ratings are referred to as the FICO credit score. This rating is perhaps the most popular and widely used model in the United States because of its robust statistical basis arising from voluminous credit files of the consumers.

The FICO Scoring Standard

Many people wonder how to raise your credit score. It is best to first understand how the scoring works. As a rating that would assess the creditworthiness of the individual, the FICO score comprises five general components that comprehensively describe the financial behavior of the crediting individual based on his credit history and other related transactions. A big chunk of this rating is based on payment history, which accounts for 35%. This component is associated with payments of bills where prompt payments are merited with high scores while late payments negatively affect this area.

Another component is credit utilization, which accounts for 30%. This component is quantified by calculating the ratio of revolving debt charged on the credit card against the prescribed card limit. Lower ratio means better score for this area. To decrease this ratio, the crediting individual must pay off his previous debt and maintain a revolving debt of just about 10% of the credit limit. Another factor that affects this component is the closure of credit accounts. Hence, it is advised to keep old credit cards. The remaining proportion accounting for 35% is shared by length of credit history (15%), types of credit applied for (10%), and credit inquiries (10%). Longer credit history, diversified types of credit transactions, and lesser credit inquiries all contribute to a good FICO score.

The FICO score range is between 300 and 850. Receiving a score from 300 to 580 indicates a poor credit score and creditworthiness. Individuals with ratings falling within this range are considered as risks for the lending company and maybe denied for credit applications. On rare instances when they get approved, interest rates are relatively very high. On the other hand, achieving a score above 750 indicates a sound financial standing. With ratings falling within this range, individuals are offered the most competitive rates in the market.

How to Get Your Free FICO Score

Free FICO scores as well as free credit reports can be acquired from websites such as myFICO.com and AnnualCreditReport.com. Their ratings are based on the model adapted by the three major credit information bureaus: Experian, Equifax, and TransUnion. By filling out forms and requesting for pertinent information, consumers are provided with appropriate credit scoring services.