FAQs
Most people think they know where their money goes, but are shocked to discover the truth. Experts say that most people, from all walks of life, spend about 20 percent more than they think they do.
A sure way to find out where your money is going is to track your spending over a period of time. To begin, carry a small notebook and record your daily spending (all of your expenditures, however small). In addition to tracking your spending, determine how much money you are bringing in each month. If you find that your spending is exceeding your monthly take-home income, the next step is to try to cut back on spending.
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A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it that I will get paid back on time?" A score is a snapshot of your credit risk at a particular point in time. The most widely used credit scores are FICO scores. Lenders use FICO scores to make billions of credit decisions every year. Fair Isaac develops FICO scores based solely on information in consumer credit reports maintained at the credit reporting agencies.
Source: www.myfico.com (This link will open a dialog box) Copyright © 2000-2003 Fair Isaac Corporation. All rights reserved. This information may be freely copied and distributed, without modification.
All credit bureaus use a process called credit scoring, or credit modeling, to evaluate the risk you pose to a potential creditor. According to Fair, Isaac and Company, the firm that developed the software the bureaus use to do the calculation, the score depends on five main criteria:
- Your payment history, and specifically whether you pay on time
- The total amount owed
- The length of your credit history
- The amount of new credit you have
- The types of credit you use
Your credit report is the basis of your credit score. Credit reporting agencies maintain files on millions of borrowers. Lenders making credit decisions buy credit reports on their prospects, applicants and customers from the credit reporting agencies.
Your report details your credit history as it has been reported to the credit reporting agency by lenders who have extended credit to you. Your credit report lists what types of credit you use, the length of time your accounts have been open, and whether you've paid your bills on time. It tells lenders how much credit you've used and whether you're seeking new sources of credit. It gives lenders a broader view of your credit history than do other data sources, such as a bank's own customer data.
Your credit report reveals many aspects of your borrowing activities. All pieces of information should be considered in relationship to other pieces of information. The ability to quickly, fairly and consistently consider all this information is what makes credit scoring so useful.
Source: www.myfico.com (This link will open a dialog box) Copyright © 2000-2003 Fair Isaac Corporation. All rights reserved. This information may be freely copied and distributed, without modification.
Since there's no one "score cutoff" used by all lenders, it's hard to say what a good score is outside the context of a particular lending decision. For example, one auto lender may offer lower interest rates to people with FICO scores above, say, 680; another lender may use 720, and so on. Your lender may be able to give you guidance on the criteria for a given credit product. For your reference, here's a break-out of FICO scores for the general US population:
| FICO Score Range |
% of US Population |
|---|---|
| Below 620 | 20% |
| 620 - 690 | 20% |
| 690 - 740 | 20% |
| 740 - 780 | 20% |
| Above 780 | 20% |
Source: www.myfico.com (This link will open a dialog box) Copyright © 2000-2003 Fair Isaac Corporation. All rights reserved. This information may be freely copied and distributed, without modification.
