If you are planning to approach a bank or credit union for a loan, there are several deciding factors taken into consideration:
- Your employment – how long have you worked for your current employer
- Your income – how much money do you make and can you afford the monthly payment
- Your FICO Score – even if you have a decent income and longevity at your employer, a low FICO score will prevent you from obtaining a loan
Whether you are considering a Home Equity Loan, Mortgage or car loan, order your credit report and find your FICO score. If you need help with your personal finances, Louisville has several debt counseling services available:
- Apprisen Financial Advocates
- National Foundation for Credit Counseling
- Free Credit Counseling Service
- Consumer Credit Counseling Service
- Louisville Consumer Credit Counseling
If you don’t need an advisory but need a better understanding of how FICO works, this series of articles will provide the detailed information you will need. FICO (Fair Isaac Company) created the credit scoring standard in the 1950’s. FICO uses advanced math and analytics to help businesses make smarter decisions. FICO works with the credit reporting agencies to provide your FICO scores. It does not determine the accuracy of the information in your credit report, which is why you should order a copy from each credit reporting agency once a year. The three credit reporting agencies are: Equifax, Experian and TransUnion.
The credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular point in time. A credit score helps lenders evaluate your credit report and estimate your credit risk. Prior to FICO the lending decisions were based on personal opinions, biases, gender, race, religion, nationality and marital status. With FICO the credit decision is objective and fairer to all.
The next article will cover how the information is collected on your credit report.