Credit score is a three digit summary of credit worthiness. This score ranges from 300 to 900 with 900 being the best score. A Credit Score of 750 and above could mean easy sanctioning of loans. Banks and NBFCs easily sanction loans on having a credit score of 750 and above.
Payment History: Credit history is very important when it comes to a credit score. Around 35% weightage is assigned to payment history. A lender gets an idea on how consistent you have been with repayments.
Amount to be repaid: This is the loan amount due and credit card outstanding. Around 30% weightage is assigned. This is the loan amounts availed from banks and NBFCs.
Credit Mix: This is the amount of secured and unsecured credit availed. A personal loan or credit card is a prime example of unsecured loans. These loans are not secured against collateral. Home loans and car loans are an example of secured loans. These loans are secured against a house or car. Around 10% weightage is assigned to credit mix.
Length of credit history: This is the duration of active credit accounts. It’s wise not to close old credit cards as this increases length of credit history. Around 15% weightage is assigned to length of credit history.
New Accounts: Availing multiple credit cards and taking many loans lowers credit score. Whenever you apply for credit, banks and financial institutions check credit history and credit score. These are hard enquiries and lower credit score. Around 5% weightage is assigned to new accounts.
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SEE ALSO: How To Improve Credit Score?
Fair, Issac and Company or FICO has a variety of credit scores used by lenders and credit card issuers. FICO scores range from 300 to 850.
FICO is a data analytics Company, based in San Jose, California which focuses on credit scoring services. Before applying for credit card, auto loan or mortgage, check FICO score.
FICO score is a 3 digit number ranging from 300 to 850. It goes up to 900 for industry-specific scores. FICO scores are assigned based on Credit Report. FICO score says how likely it is you’ll repay debt. Lenders use FICO scores to manage accounts, assess you and other applicants or determine interest rates. Fair, Issac and Company is the pioneer of the credit risk score way back in 1981.
A high FICO score gets loans at competitive rates and terms. A low FICO score means loans are denied or sanctioned at high interest rates.
FICO extends to insurers. A lower FICO score means higher insurance premiums. Some insurers have a threshold FICO score, which you must pass to avail insurance.
SEE ALSO: How to maintain a good CIBIL score?
FICO has three versions of the base FICO score. This is because it works with data from three different consumer credit bureaus, Equifax, TransUnion and Experian. FICO has the FICO BankCard score and FICO Auto score.
In 2006, the three big credit reporting bureaus, Equifax, TransUnion and Experian joined together to create the VantageScore. Several versions later, the VantageScore 3.0 had a blockbuster debut in 2013. More than 6 Billion VantageScore credit scores influenced lending decisions between July 2016 to June 2017. VantageScore 4.0 was launched in 2017.
VantageScore ranges from 300 to 850. These factors determine VantageScore.
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