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About Fico Credit Score

To obtain a loan, a credit score, also known as a credit rating, is required. One of the most well-known types is the FICO score. Let's explore what FICO means.

FICO stands for Fair, Isaac and Company, the entity that developed the calculation method for FICO scores. As you may know, FICO scores range from 300 to 850. A lower score indicates a higher risk for lenders, while a higher score suggests a lower risk.

FICO does not directly compile an individual's credit history. Instead, it calculates the FICO score based on credit information gathered by the three major credit bureaus: Equifax, TransUnion, and Experian. The FICO score is determined according to the following ratios:

  • Payment history: 35%

  • Debt owed: 30%

  • Length of credit history: 15%

  • Types of credit in use: 10%

  • New credit: 10%

By examining these ratios, you can understand how to improve your credit score quickly. It's crucial to promptly pay the monthly installment, regardless of the amount, and to reduce the amount of debt you currently owe. Over time, these practices will contribute to an increase in your credit score.

Today, we briefly covered FICO scores, commonly referred to as credit scores. I'll return with more helpful information in future posts.

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