What is FICO Score and How it Connects with Debt

Monday, May 6, 2013, 1:00 AM | 1 Comment

When you go to purchase a car or a house, you will be asked for information to determine what your credit score is. That credit score is your FICO score. FICO stands for Fair Isaac Corporation, which is the company, that analysis your credit report. It is that analysis that gives you your score.

There are many things you can do to either improve your score if you currently have bad credit. The one thing you will need to stay away from being payday loans. That is because they cause more damage to your score than anything else does.

  • Protect Score

    Before you can improve your score, you will need to protect your current score. This is where your debt comes into play. If you pay your bills on time, then you will have fewer problems with your credit score. If you miss a deadline, stay in constant communication with the creditor so they know what is going on.

  • Improve Score

    The only way to improve your credit score is to get out of debt, and not to accrue any new debt. This means keeping your credit cards paid off, but not cancelled, and not applying for loans that have such high interest rates that you cannot pay them off. Credit cards are known as revolving credit and can actually raise your credit score if paid on diligently.

    With high interest rates, things like title loans, payday loans, and other high-risk loans require a person to pay back the entire amount in a very short period. They do not offer payment plans that are reasonable. If you only pay a portion of the bill, then you will have to pay interest on the remaining part and that could be between 50 to 60 percent of the tab.

  • Repair Credit

    If you have messed up in the past, not all hope is lost. It is possible to repair your FICO score and move past your debt. As you pay off your debtors, you need to ask them to change the status of their claim on your credit report. As you move forward, then you will want to stay on top of your debt.

    Borrow money wisely, and only borrow what you can realistically pay back in the set amount of time. Also, when you open new lines of credit, have a game plan set so that you do not just start using them and accrue debt as you did previously.

    If you use credit cards, pay the balance in full at the end of the month. Do not get a payday, title, or other high-risk loans. Finally, realize that just because you close a troubled account, your troubles do not go away. You will need to work with the account for a payment plan that you can manage and pay on regularly.

The banks and creditors want to work with you as much as you want to work with them. When a person files for bankruptcy, everyone loses. That is because your credit score is greatly affected for many years, and your creditors are out their money.

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  1. One Response to “What is FICO Score and How it Connects with Debt”

  2. By facebook likes to get a puppy on May 27, 2013, 3:58 pm | Reply

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