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Your FICO Score and You

Posted March 25th, 2010
by PersonalLoans.org Staff

So, you want to get a personal loan so you can go out and get that shinny new toy you have been longing for all winter. Maybe you want to get a motorcycle, or you just want a high-end grill.

No matter what the case is for you personal loan, that FICO score is going to come up during the application process. Do you know what all those numbers and legal mumbo-jumbo means? Here is a quick breakdown of that craziness the credit agencies call your FICO score.

FICO score breakdown

Your score is influenced by five factors. These factors also come with a weighted measuring system. The factors and their weights are:

  • payment history with a 35 percent weight,
  • your current debts with a 30 percent weight,
  • credit history length with a 15 percent weight,
  • new credit accounts opened with a 10 percent weight,
  • and credit types with a 10 percent weight.

Now that you know where the biggest areas of credit scoring come from, let’s take this even further.

Payment history and current debts rock your FICO score

When you apply for a personal loan, the lender is going to see all of your debts and payments. They are going to know that you have missed five payments on your auto loan. Missing a payment to the electric company most likely will not hurt you until the electric company goes to the collection agencies.

The lenders are also going to see that you have small loans out all over the place. The good thing is they can’t see you owe Aunt Jenni $5 for lunch. So you are ok there, well, at least to the bank.

What really crushes that FICO score is collection agency issues as well as delinquent credit account. The best thing you can do for yourself is to watch how much money you have out and ensure you can pay all your debts on time.

Controllable and uncontrollable factors

There is one item you cannot control in all of this. That item is length of credit. An 18 year old will never have the credit history of a 50 year old. It just will not happen. What you can control is how that credit build from 18 – 50.

When you apply for a personal loan, don’t apply at several places. All these applications will show up as new credit. If you get five personal loans, people are going to see this. If you apply for ten personal loans and only get two, lenders will see this as well. Best bet, apply at one or two places and only do it on a yearly basis.

Manage your credit types

There are several credit types as well. Did you know a credit card from Sears is different from a plain old Visa credit card? They both carry different weights. The same is true for mortgages, auto loans, credit cards, and retail cards. Knowing how to manage these accounts can be very beneficial in easily boosting that FICO score.

This was only a basic rundown of how to read your FICO score. Armed with this information, you will be better off when you apply for that personal loan. Who knows, you just might teach your banker a little something. It could happen!

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