Why Should You Get Your FICO Credit Score Online?
Legislation passed a law several years ago that stated that everyone has the right to get a free credit report from all three credit bureaus once a year. Unfortunately, this doesn’t necessarily include the FICO score. If you are looking for the easiest option, then you should get your FICO score online. Most people don’t realize it, but the only credit score that is important is the FICO score. Let’s take a quick look at why your FICO score is the most important.
The reason to get your FICO score online is that it is used by more than 90% of all lending institutions. This is largely because Fannie Mae and Freddie Mac recommended that lenders use FICO scores in 1995. Since they were purchasing nearly 66% of all real estate loans, most lending institutions complied and started to use the FICO score over any other credit score. Keep in mind there are a large number of other credit scores that exist, so make sure that the score you are receiving explicitly states that it is a FICO score, not just a “credit score”. Some of these other scores include the TransUnion Score, Experian Plus Score, and the Vantage Score, however until they are more widely adopted, they should be considered as secondary scores.
How Much Does Your FICO Score Affect You?
Your FICO score is the main score that is used to determine things like your mortgage rate, interest rate on an auto loan, and even the terms of your credit cards. With a difference of as little as 100 points could mean that you will pay more than $25,00 in interest on a mortgage for a $300,000 home over a period of 30 years. It is also estimated the more than 35% of employers use your FICO score when doing a background check on employees. Even landlords now use your FICO score to decide if they should allow you to sign a lease.
What Should Your FICO Score Be?
You get your FICO score online, but how do you know if it is good or not? A general rule of thumb is that you need to try to keep your FICO score above 700. A lower score, like 620, tells lending institutions that you are a high risk and will often either deny your loan application or force you into accepting sub-prime rates.
There are 5 factors that will affect your FICO score and you have the ability to improve all of them. However, it is important to keep in mind that these five factors are not treated equally.
- 35% of your score is determined based on your payment history
- 30% of your score is determined based on the amounts that you still owe
- 15% of your score is determined based on the length of your credit history
- 10% of your score is determined based on new credit
- 10% of your score is determined based on the types of credit that you have used in the past.
If you are looking to improve your score, make sure that all of your bills on paid on time and try to pay down larger debt such as credit cards and loans (mortgages, student loans, and auto loans). Improving your FICO score is not an instantaneous process, so most people recommend that you take another look at it every year. Get your FICO score online and see how much it has improved and reevaluate what you can do to continue improving it. By improving your FICO score, you will be able to lower your interest rates on loans and credit cards, increase the likelihood of instant loan approval, and reduce or even eliminate the required down payment and collateral that a lending institution requires.
