Your "FICO score" is a numeric representation of your "financial responsibility" based on your credit history.
Potential lenders may use your FICO score to decide whether or not to grant you credit and what interest rate to charge. Thus, it's extremely important to know your FICO score before you apply for any loan or credit card.
Your score is a number in the range 300-850, with 300 representing "poor credit risk" and 850 representing "excellent credit risk." Actually, you have three FICO scores, since each of the three national credit bureaus (Equifax, Experian and TransUnion) performs its own computation with the data it has and with its own scoring system. Lenders often look at all three scores and combine them with their own assessments of credit worthiness.
Approximately 40% of Americans have FICO scores of 750 or higher, and approximately 1% have scores lower than 500.
Your FICO score will have a profound effect on the interest rate you receive on an automobile loan.
An Example
The interest rate on a 4-year used car loan at a local car dealer was a rock bottom 5.697% for buyers with FICO scores in the range 720-850, but it increased to a whopping 24% for those with scores in the range 500-589. I assume those with scores under 500 did not qualify for a loan.
Some unethical loan providers will approve those with the lowest scores with a down payment, high interest rate and the loan is written for as many as 6 or 7 years, meaning you will be paying as much as four times what the vehicle is worth by the time you pay off the loan. Please always read the fine print and you can always have the salesman/loan officer print out your application and take it to your bank and ask them to explain it to you before you sign it and agree to the terms. The hidden application fees and "loan approval fees" can only add to the amount you are financing.
How to Improve Your FICO Score
In addition to providing your FICO score, MyFICO.com explains in detail how you can improve it. Here's some of the more obvious advice:
- Pay your bills on time.
- If you have missed payments, get up to date and stay up to date.
- Keep your credit card balances low--way below your credit limit.
- Pay off your debt rather than moving it from one account to another.
- Don't open a lot of credit card accounts.
MyFICO offers informative, actionable credit-information services that help people improve and protect their overall financial health.
See the web site for more ideas. MyFico.com Fico Scores/Reports
No comments:
Post a Comment