The Truth Behind FICO!

Hopefully, if you have come across this article, you are in the midst of doing some auto research. Perhaps you are looking to buy an older model from Warwick used cars? Or do you have the urge to get a luxurious model from Cadillac Service? Whatever your case may be, chances are that you are going to need some financing for your new or newer vehicle purchase. While Arizona Volkswagen is offering amazing deals and rebates on some of their VW line-up, there is still a hefty remainder of the sticker price that you will need to come up with cash for; or, a more practical solution, financing. No one is going to give you anything for free, and sadly, a handshake and promise don’t mean much anymore. Companies need a way to grade you, so to speak. There is no company out there who wants to lend you money and then never see it again.

Fair Isaac Corporation, or Company depending on your sources, is the institution responsible for creating the credit score risk guidelines. Many people dread even talking about the subject, but the whole thing is just a number, and it is a number that can be changed. You need to understand the five pieces of the pie that make up your FICO credit score and then you will have a better chance at improving, also known as increasing, your score!

The biggest piece of the pie is your payment history, worth about 35%. Payments include your credit cards, loan payments, mortgage payments, and retail credit cards. FICO looks at if you have been on time, the total amount you owe, and how many late payments you have had.

Second is your total outstanding balance, worth about 30% of your score. The best plan is to not be near your credit limit on any of your lines of credit. It is ok to put a little bit of charges on a lot of cards, but when they all start reaching their maxed-out point, your score goes down.

Third is your history, worth about 15%. If you are just starting out, be patient as there is not much you can do but wait. Fourth is how much new credit you have acquired. This is pretty much all new activity besides payments related to you and credit; opening new lines, having third parties look at your score, and closing accounts. Lastly, is the type of credit you have, worth about 10% of your score.