Many consumers today are interested to know how some individuals are able to build and maintain excellent credit profiles. Are you one of them? If you are then, it is important that you understand first how companies, such as FICO, evaluates your credit activities and computes for your credit score. We have also discussed below several habits that people with good credit standing have in common, so that you can start incorporating them in your day-to-day activities.
Credit Monitoring – a First for FICO
FICO, which stands for Fair Isaac Corporation, was founded in 1956 by Earl Isaac, a mathematician, and Bill Fair, an engineer. The main objective of the firm is to be a pioneer in offering analytic information and decision-making services to banks and credit agencies in the country, by developing a standard credit scoring system. The system they introduced employs three-digit scores, which range from 300 to 850.
The FICO scoring system has become very popular among financial institutions. In fact, the three major credit bureaus – Equifax, Experian and TransUnion – are still using it to provide consumers with their credit ratings. But what does your score mean?
Well, if you received your latest annual credit report and you discovered that your score is near the 300-mark; it’s an indication of poor credit standing, as well as of low financial prospects. On the other hand, if your three-digit-score falls near the other end of the FICO range, say 800, then, you can be considered a high-achiever, who can look forward to receiving affordable credit offers, later on.
5 Habits of Consumers with Excellent Credit Standing
Now, let’s tackle habits shared by individuals, who often receive high credit scores in their annual reports:
1. They keep their revolving balance low. Although they have lines of credit which carry high spending limits, people with high credit scores see to it that they use just a low percentage of their available credit.
2. They’re not completely debt-free. In fact, recent studies show that high-achievers normally have as much as $8500 in their non-mortgage accounts.
3. They never miss or skip on their payments. After all, they understand that payment delinquency can inflict damage to their credit history and personal finances. So, they make sure that they pay their dues on-time. According to a recent report, 96% of these individuals receive perfect scores in terms of their payment history, although some of them submit just the minimum amount due to their creditors. That’s because they know for a fact that their payment history represents as much as 35% of their respective FICO scores. So, they strive to make consistent payments, on a monthly basis. And this, in turn, helps them receive the highest possible scores.
4. Some may have had credit problems, in the past. For instance, some consumers may have records of bankruptcies and tax liens. However, their regular payment-habits help prevent their credit scores from sliding down.
5. They don’t open new accounts. Actually, most of them have had the same credit accounts for 11 years or so.
Hence, if you suffer from a low credit score then, now’s the time to make the necessary changes in your credit and payment activities for you to eventually receive a better credit score. And remember that sticking to such habits will allow you to reap the rewards of having an excellent credit standing.
ABOUT THE AUTHOR
This article was written by the writing team of NewHorizon.Org. The company is continuously giving out free credit repair guide to people who are ready to improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 14+ years of business finance experience help you to get the financing you need! Contact us if need financing for your business.