Business & Finance Credit

The Relationship Between Credit and FICO Score and How it Affects You

As much as we wish it were possible to pay cash for everything, this is not always possible.
When liquid cash flow is low, it becomes necessary to look for other means of paying for goods and services.
This is where credit comes into play.
In short, when you do not have the cash to pay for something, you will need to employ a lending source to promote the transaction.
For better or for worse, this is where the relationship between credit and FICO scores is revealed.
In some instances, the connection between the two is helpful and then there will be instances where it is harmful.
Understand the relationship between credit and FICO scores will allow you to understand why.
Lenders cannot provide funds to people that may be bad prospects for paying back the money that has been issued.
To do so would run the risk of turning their business insolvent.
Rather than deal with such a potentially disastrous situation, it would be a much better idea to lend to those that have a long track record of paying off their debts.
This is where the relationship between credit and FICO scores is demonstrated.
A Fico credit score will clearly present your payment history and your viability as a lender.
This is the most important credit score of all because this is the report that the vast majority of credit reporting agencies issue.
Roughly 75% of creditors use the Fico credit score report in order to make a determination.
This is not to infer there is anything wrong with the other credit reporting agency scores, but the vast majority of lenders will not even look at those scores.
Rather, they will invest most of their energy and effort looking at the real score issued by FICO (an acronym of Fair Isaac Corporation, the creators of this score).
As such, if you have an excellent credit report and score you will find your ability to procure credit to be less difficult than others may experience.
Conversely, those with a poor credit score will discover financing to prove elusive.
Again, this is just the nature of how the lending business works.
No entity wants to lend money to someone that may prove to be a bad lending prospect.
This means if you have good credit, you need to do whatever is possible to make sure your credit does stay good.
Late payments must be avoided and having credit card limits that are too high is another potentially disastrous scenario.
Keeping an eye on such problems will certainly aid in improving the relationship between credit and FICO scores.
And if your credit score is low, you will need to do what is necessary to raise it.
This may be a little difficult to do but the effort will be well worth it in the end.

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