eFinancial Portals

Your FICO® score is a credit score developed by Fair Isaac & Co. A credit score is simply a method of determining the likelihood that a borrower will repay their loans. A credit score condenses a borrower's credit history into a single number ranging from the 300s to 900, with most people falling into the 600-700 ranges. The higher your score the more favorable your terms (Lower Interest Rate) will be when applying for a loan.

While Fair, Isaac & Co. and all three major credit bureaus (Equifax, Experian and Trans Union) do not reveal exactly how these credit scores are computed, the Federal Trade Commission has ruled this to be acceptable. However, what is generally known is that scores are calculated by using various scoring models and mathematical tables that assign points to various pieces of information, which translates into predicting a borrowers credit performance.

Some of the predictive factors that are analyzed include:

• The amount of time credit has been established;
• Late payment history;
• The amount of credit used versus the amount of credit available;
• Length of time at present residence or present job;
• Negative credit information, such as bankruptcies, charge-offs, collections, etc.

Often FICO® scores will be different for all three credit bureaus; Experian, Trans Union and Equifax. Some lenders will use the score from one of these bureaus while other lenders use all three and go with the average score.

Ways to Increase Your Score

Increasing your FICO® score takes time. Do not expect results overnight. Instead, apply a slow methodical approach to increasing your score over time. Once your score does increase, work hard to keep it that way.

Here are some tips to help you increase your score overtime for all three credit bureaus.

• Pay your bills on time. Late payments and collections can have a highly negative impact on your score.
• Do not apply for credit frequently. A large number of inquiries on your credit report can lower your score.
• Reduce your credit-card balances. Never max out your credit cards. As a rule of thumb, try to keep your balance
• If you have limited credit, work to obtain additional credit. Not having sufficient credit can negatively impact your score.
• Check your credit report regularly to ensure there are no unauthorized charges or errors. If you notice either, contact both the reporting bureau and creditor ASAP and dispute the errors.

For an example of how a higher FICO® Score can decrease your interest rates, see rate table example below:

Notice that if your FICO® score was 760; your monthly payment would be $161 a month less than if you had a score of 630. That may not seem like a whole lot but over the course of a year that equates to a $1,932 savings annually or an $11,592 savings over 5 years. As you can see, it is very important to get your score as high as possible in order to save money.