fico score percentage – Some Misconceptions Cleared
There are many misconceptions surrounding the Fico score. It is important to get your facts straight to avoid confusion in an important part of your financial life.
For starters, there is a huge difference between your Fico score and your credit reports. The Fico score is a statistical rating that is assigned on the basis of the credit reports of the individual. In brief, the credit report acts as data base that is analyzed to determine the Fico score.
Another misconception relating to the score is that this is the only credit scoring methodology utilized in the economy. The Fair Issac Corporation was one of the first organizations to come up with the credit scoring model. However, it is, by no means, the only scoring model used in the economy. Of course, many third party lenders rely on the Fico score, but there are numerous other lenders relying on other scoring methodologies as well. Hence, before you conclude that the Fico score is the only score related your finances, you should keep in mind that it all depends on your choice of lenders and their preferred credit scoring model.
You can find on the internet detailed information about the various factors taken into consideration before computing the Fico score, as 35% of your score is computed on the basis of your repayment pattern. Only 30% is computed on the basis of current debt level, while 10% is computed on the basis of your credit mix and number of inquiries. The 15% balance is computed on the basis of the length of your credit history.
Apart from these factors, no other factor is considered when computing the score. You might have noticed that your current income level, the assets in your hand and other such factors, are not taken into consideration at all. This makes it obvious that your Fico score cannot be the only basis of your credibility and loan worthiness. It might have a huge impact, but it certainly cannot be the sole factor.
If you are earning more than a hundred million dollars per year, it’s obvious that your credit score might be irrelevant for a loan amounting $100,000. The sheer size of income defeats all the negative points. However, you cannot expect to qualify for a one million dollar loan at affordable rates just because you have a high credit score. A lot depends on your monthly income and other financial factors as well.
Another misconception relating to the Fico score is that it can be wiped clean and sanitized without any difficulty. Each and every transaction that becomes a part of the report is analyzed and assessed by the credit bureaus after information is received from the lenders. It is obvious that removing information from the credit report is possible only with the consent and verification of the lenders.
The Fair Credit Rating Act requires the lenders to verify each and every dispute raised relating to the credit report within a span of 30 days. The disputed info will be automatically removed the moment 30 day expire. However, arbitrary changes to the score is illegal and unethical.
So these are the basics that anyone and everyone should know about Fico score, as it is important information for anyone that is out for getting a loan.
