What is a FICO Score?

January 5, 2012 - 05:44 by bankruptcylawyer

FICO Score

Your FICO score may be better known to you as your credit score.  This system of measuring your “credit worthiness” was founded by the Fair, Isaac and Company and has been used reliably by lending institutions since the mid-1960s.  The FICO system determines your credit score based on how well - or poorly - you manage your debt.  In the case of individuals who wish to declare their self bankrupt to gain relief from creditors, bankruptcy lawyers can advise their clients of the impact various types of bankruptcy can have on a FICO score.

Your FICO score takes into consideration whether you pay your bills on time, how many credit cards you have, how much debt you carry, whether you pay the balance each month and whether you are currently bankrupt or released from bankruptcy.  All of these details are compiled by three credit bureaus who track our financial activities.  Every time you pay – or fail to pay – a bill on time, it gets reported by your lender/ creditor to one (or more) of three credit bureaus.

Your financial track record indicates your credit worthiness through your demonstrated ability to repay what you borrow from lenders. Your score is a predictor of whether you are going to repay the money on time and in full, whether you are likely to default on your payments and whether you’re on the path to making an appointment with bankruptcy attorneys.  The higher the default risk you pose to creditors, the higher the interest rate they will charge you.  High interest rates are the lenders’ insurance against the losses they expect to incur in the event you fail to repay your debt.

What do FICO scores look like?

  • 850-720  (Really good)
  • 719-700
  • 699-675
  • 674-620
  • 619-560
  • 559-500  (Not good)
  • 000-499  (Really bad)    

How is my FICO score calculated?

  • Payment history (35%) – Late payments and various types of bankruptcy have a negative impact on your score.  Risk is calculated by how frequently you miss payments, how long it takes you to pay, how recently the late payment event took place, whether you’re currently bankrupt or how long since you’ve been released from bankruptcy.
  • Outstanding balances (30%) - Risk is calculated by comparing your total balances with your total available credit.
  • Length of credit history (15%) - Your score favours how long your various credit accounts have been open and how frequently you use the accounts. 
  • New Credit (10%) – Opening more than one credit account within a short time frame is a good way to begin establishing a credit history.
  • Types of credit (10%) – Your score considers the total number and types of accounts open in your name. It looks at the number and type of credit cards you use (bank or department store), lines of credit such as student loans or home repair, automobile financing and mortgages. 

How to Get Your FICO Score:

Beware of fake FICO reports – you do not have to pay money to learn your credit score.  Some instances where you may need to know the exact number of your FICO score include applying for a mortgage or large line of credit and investigating why your application for such loans has been rejected.  Should you choose to seek relief from creditors under the Bankruptcy Code, your credit counsellors and bankruptcy lawyers will require your credit information and score.  The easiest way to get your free credit report is to approach the credit bureaus mentioned at the beginning of this entry.  You can apply to them individually by using the contact information below:

  • Equifax (US)                           (800) 685-1111           www.equifax.com

    Equifax (Canada)                    (800) 465-7166           www.equifax.ca
  • Experian (US)                         (888) 397-3742           www.experian.com    

    Experian (Canada)                  (888) 397-3742           www.experian.ca
  • Trans Union (US)                    (800) 888-4213           www.transunion.com      

    Trans Union (Canada)             (800) 508-2597           www.transunion.ca

 

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Why are you considering bankruptcy? (select all that apply):
Estimate Total Debt:
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What bills do you have?
Estimate Total Monthly Expenses:
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What types of assets do you own?
Do you own real estate?
If Yes, are you behind in these payments?
Do you own an automobile?
If Yes, are you behind in these payments?
Do you have any additional assets worth more than $100,000?
If Yes, please describe:
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What types of income do you have?
Estimate Total Monthly Income:
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