What is FICO score?
- Asked By
- Updated On:29-Nov-2022
- Replies:1
Short Answer
FICO is Fair Isaac Corporation, that gauges your creditworthiness using five major indicators - loan repayment history, current level of debt, length of credit history, blend of loans taken and newly opened credit accounts.
Detailed Answer
What is FICO score?
FICO is an abbreviation of Fair Isaac Corporation, which is the creator of this analytics software. It is a score given to you based on your credit borrowing and repayment history. When you approach a lender to borrow a loan, FICO score acts as an assessment tool to test your trustworthiness. This score can be accessed both by the borrowers and the lenders.
Indicators to assess your FICO score:
There are five major indicators that are used to test your creditworthiness:
Loan repayment history
This checks if you have repaid your dues on time without any default and if you have filed for bankruptcy at any point.
Length of credit history
This is to see how long you have a credit history, to assess your behavior trends. The longer you have had debts and if you have been paying them promptly, there are possibilities that you will have a better FICO score.
Types of loans taken
It examines the type of loans you have, whether it is an education loan, home loan, credit card loan, car loan, personal loan, etc. If you have had a blend of loans, there is a chance for your FICO score to be high.
Current level of debt
The value of debt that you currently owe. FICO assesses the original loan amount taken and the current outstanding. If you have repaid a major portion of the loan taken, you are expected to have a good score.
New credit accounts
It checks the loan accounts you have recently opened. If you have opened a number of loan accounts in the recent past, your credit score is believed to drop.
Weight-age given to each category
The company calculates your score by assessing the above indicators. Here we have listed the weight-age given to each indicator:
- Loan repayment history: 35%
- The current level of debt: 30%
- Length of credit history: 15%
- Types of loans taken: 10%
- New credit accounts: 10%
Updates to FICO score
The credit scoring software company keeps updating its tool and there are several versions that serve different sectors. We have listed the most commonly used versions:
- Widely accepted: FICO score 9 and FICO score 8
- Auto lending sector: FICO Auto 9, FICO Auto 8
- Credit card industry: FICO Bankcard 9 and FICO Bankcard 8
- Mortgage applications: FICO Score 2, FICO Score 5, FICO Score 4
- Latest updates: FICO score 10, FICO Auto score 10, FICO Bank card score 10, FICO score 10T
FICO Score
To conclude, FICO score is one of the trusted and prime yardsticks for lenders to gauge your financial reliability.
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
Does the US-based credit analytics company - Fair Isaac Corporation (FICO) have a base in Canada? Know if FICO score is used in Canada? Yes, FICO score is used in Canada to assess the creditworthiness of a borrower.
FICO score is an important parameter to check your credit worthiness. According to the findings of Equifax, a FICO score between 660 and 724 is deemed to be good.
You must have a credit score of more than 660 in order to buy a house in Ontario via mortgage application. If you have a score that is less than 660, the banks would deem you not to be creditworthy for lending purpose.
Yes, 650 is a good credit score in Canada. Anything below 650 is classified as a fair credit score.
Yes, the credit scores published by Borrowell is accurate and reliable as the company is associated with Equifax and it uses Equifax risk score 2.0. There might be some variances in the score when compared to Equifax as the company's system takes up-to 1 week to update its system.
You need to have a good credit score in Canada to be qualified for a mortgage. Mortgage lenders use it to assess the risk of lending to a certain person and to determine their creditworthiness. A score of 650 or more is often regarded as outstanding in Canada, however the precise standards may vary according on the lending institution.
A business credit card is a powerful tool for solving the business and personal financial needs. But a business credit card can affect your personal credit score. It totally depends on how you use it.
Credit score and credit report of Borrowell are free. However, Rent advantage and credit builder has subscription cost of $5 and $10 per month respectively.
There's no specific time requisite to get a mortgage in Canada. Yet, lenders generally prefer borrowers who have a stable income and credit history, which can be established through a longer period of occupancy and employment in Canada. Eventually, the decision to authorize a mortgage application will depend on a variety of factors, including income, credit score, and debt- to- income rate
You can transfer your credit card balance into your bank account by drawing funds from ATM and then crediting it to your bank account, do online transfer, draw a cheque or visit your bank branch in person.