FICO: This is an acronym inspired by its creators, the Fair Isaac Corporation. The Fair Isaac Corporation pioneered what’s known as the FICO score (or the credit score that determines the majority of lenders’ decisions regarding a person’s eligibility to receive a loan). As such, FICO scores are extremely valuable tools. So valuable, in fact, that until recently, people had to pay to find out what their FICO Score was (if they were able to track it down at all).
It used to be hard for people to find out what their credit score was exactly. In addition, these credit scores used to be inaccurate and based on outdated or even false information. Now that FICO scores can be accessed freely, opportunity for individuals to improve their credit scores and their lives has massively increased.
FICO scores have become available to borrowers. FICO scores are calculated on the basis of a number of factors relating to credit data. Relevant factors include the amount of debt a person has, whether they have ever filed for bankruptcy, their payment history and any other relevant financial behavior.
A high score is positive for a borrower, as lenders will consider them to be more worthy of receiving credit. A FICO score over 650 generally indicates that an individual’s credit score is positive. Individuals with scores lower than 650 are likely to find it very difficult to obtain credit.
The implications of a low FICO Score can be troubling for an individual. This score doesn’t just affect the ability to get a loan. Potential employers often perform credit checks (especially in certain professions) and a low FICO score could imply that an individual is less trustworthy or is open to corruption. Having a low FICO score could make it more difficult to obtain a mortgage, or even to rent a property— as landlords also may check a score to ascertain that rent will be paid on time. Gaining insurance coverage at a decent price could also be problematic, as a low score may exclude eligibility from discounts, and even make it necessary to pay higher premiums.
Though having a low FICO score has numerous drawbacks, it’s important to remember that a negative score can be corrected. Financial experts can provide advice on how to improve low FICO scores—so don’t be afraid to ask for help!