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What is FICO score?
This is a credit score developed by Fair Isaac & Co. FICO is based on a person’s past credit history. A credit score helps the creditor to decide whether to extend credit to a particular debtor, and under what terms. Credit scores are calculated by using pre-developed scoring models and mathematical tables that assign points for different pieces of information which best predict your future credit performance. FICO is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be.

What affects your credit score?
A credit score is much like a school report card. A creditor gets penalized for wrong doings and rewarded for his positive deeds. Like test score the higher the credit report the better are your chances of obtaining more credit.

First let’s talk about factors that affect your credit score positively:
• Paying your bills on time and in full improves your payment history and track record.

• A steady source of income or a steady employment keeps your credit score high and you are viewed as low risk creditor.

• Portion of credit used. The amount used by you should not exceed 25% of your available credit. This implies, if your credit limit is $10,000, you should have ideally used $2,500.

Factors that affect a credit score negatively:
• Your record is full of late or missed payments.
• Having very small balance with irregular payment history.
• Bankruptcy.
• Opening numerous credit accounts in a short duration
• History of unemployment
• Liens or foreclosure

How can you increase your credit score?
• Avoid late payments. Late payments have a serious impact on your credit scores.
• Stop falling into the trap of taking credit frequently.
• Don’t exhaust your entire credit limit. Stretching up to the maximum credit limit doesn’t go well with your credit score.
• Contact your creditors or credit councilors if you are experiencing problems in payment. Consulting councilors won’t work as instant coffee and won’t fix the problem immediately.
But it will certainly help you in improving your score over a period of time.

Should I close my older card accounts?
No, you should not close your older card accounts. A lender feels reassured if you have managed your finances well over a period of time. It demonstrates that you have financial maturity and it increases your credit scores.

Should I have several credit accounts?
Opening numerous credit accounts in a short span of time implies that you are desperate for credit: something no lender likes in a potential creditor. Opening many credits accounts also shows that you are narrowing down your chances for other credits which you really need.

Does having several types of credit constitute a healthy mix?
You shouldn’t go for a mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans if you don’t need all of these. A healthy mix will reflect positively on your credit score. But don’t open accounts you don’t intend to use.

Should I use credit to rebuild my credit?
Yes, it is absolutely true. Creditors like to seek information Lenders like to see your credit payment history. Pay your credits in time and avoid interest charges.

Should I report emergency situations to the lenders?
We all face undesirable situations in our lives for instance, a death of a loved one, accident, serious illness etc. We all take time to recover from unfortunate situations. If you report to your lenders about your latest emergency, they take the stock of the situation and act compassionately. A mutual understanding can be worked out and repercussions will not be left on your credit score.