5 Benefits of High FICO Score
In today’s world where most businesses and households run on credit, having strong creditworthiness is more than important. A high credit score builds up your financial power, making you eligible for financial services and loans. Nationwide consumer reporting agencies, such as Equifax, TransUnion, and Experian, look at your credit reports to calculate your credit score, which is a representation of your credit worthiness. However, the real question occurring in everyone’s mind is whether your FICO score is important enough to be worth all the drama.
Many find it hard to be vigilant of their financial position and their credit score at all times, especially when a tiny mistake can make the score plunge. In such a situation, they wonder if they should even be making an effort to maintain a high FICO score. The benefit of a High FICO Score is to analyze what makes the FICO score so important, it is essential to first see what benefits a high score can bring to you. Credit experts often state that good credit is a consumer’s superpower. It is with this financial strength that you can get what you want the way you want it.
What is a FICO score?
FICO Score is a credit scoring method created by Fair Issac Corporation. This FICO is an analytical Software Company that helps both the customers and the loan providers with the credit scores. Using these credit scores, the lenders make decisions on approving the loan application. The FICO scoring model will get updated from time to time and the recent FICO scoring model is FICO 10 Suite.
How FICO Score Is Different From Credit Score?
Credit Score is the general term used to describe the score of the customers by evaluating their credit worthiness. There are many scoring models for calculating credit scores. One among them is FICO.
How to Calculate FICO Score?
FICO scores are calculated based on five criteria like current indebtedness, previous payment history, type of credits used, length of credit, and new credits. Considering the customer’s performance in these 5 areas, they evaluate the customer’s creditworthiness. FICO scores are three-digit scores.
High FICO scores score more than
Benefits of High FICO Score
- New Loan
Each time you apply for a new loan, the lender will try to access your credit history and see whether you will be able to honor your promise of paying back the amount you are borrowing. A high FICO score means that in the past you have always paid back the money owed on time and are very unlikely to default on a payment. A good score will encourage the lender to approve your new loan.
- Interest Rate
With every loan come to some strings attached. Interest rates are one of the things that come across as a cost of borrowing money. People with a good credit history are perceived as ‘safe bets’ whereas people who have a bad credit score are seen as ‘risky’. As a result, lenders charge a higher interest rate to those people who are risky investments and have a bad credit score.
Many employers run an in-depth background check on their prospective employees. One of the factors that are thoroughly checked is financial standing. Many employers treat credit history as a parameter for judging an employee’s sense of responsibility and conscientiousness. Nobody wants to hire someone who is deep in debt or cannot take care of himself financially.
When you go out to rent a house or apartment, you are entering into a contract in which you promise to pay the landlord for using his property. The landlord determines his decision of whether to rent out to you based on your credit score.
Insurance companies also look at your FICO score while they are reviewing your application. This is especially true for car or homeowner’s insurance. Therefore, maintaining a high FICO score can help you land a better deal in most related cases.
Frequently Asked Questions
1. How fast does my FICO score change?
Your FICO score can change whenever your credit report changes. But your score probably won’t change a lot from one month to the next. In a given three-month time period, only about one in four people have a 20-point change in their FICO score.
2. Why are my FICO score and Vantage Score different?
A score is a snapshot, and the number can vary each time you check it. Your score can vary depending on which credit bureau supplied the credit report data used to generate it. Not every creditor sends account activity to all three bureaus, so your credit report from each one is unique. Each company has several different versions of its scoring formula.