One very imperative aspect in your overall credit worthiness package is your FICO score, however what exactly is it and how does it bear upon your debt consolidation choices?
What does FICO mean?
FICO is an acronym formed from the letters of its developer, the Fair Isaac Corporation. It is a number between 400 and 800 that rates credit worthiness according to a proprietary algorithm invented by the business, with 400 being least and 800 being the better, there are also other businesses now who have their own variations.
Though the information of the algorithms are a carefully held trade secret, over the decades many people have reverse engineered several of the important elements such as, any late payments may lower your amount, and the more of these and the later they're, the more heavily the total score is changed also the total amount of debt carried per month is one more part a more or less critical part is the total number of credit cards and credit checks carried out.
What do the total numbers mean?
Any total below about 620 is considered marginal and below 580 is definitely poor with 720 and above being very good to excellent, the range between 620 and 720 represents a kind of gray area, where things other than your FICO may play a more decisive part in loan decisions, banks, credit card issuers, mortgage companies and other lenders may use your FICO total as a very critical criteria for deciding whether to make a loan, and for what interest rate, all things being the same the higher your score the better interest rate you can get, of course, in many instances all things are not equal, prevailing interest rates, the current demand for loans, the general economy and other elements have a large influence on the willingness of lenders to lend and at what rate.
Also, the whole lending industry has undergone at least two decisive changes in the last 20 years, with the increasing use of technology, computers and modern financial systems, underwriting loans is done very differently today also, not surprisingly, the Internet has moved finance to a very different system of working, even with all those changes, or perhaps in part because of them, the FICO score remains a primary tool for lenders, it may not decide the final decision, notwithstanding this, it indeed influences the 'first cut' when lenders are presented with a lot of applications to approve or disapprove.
Lucky for these who have financially tripped, there are alternatives, though your FICO may be low you nevertheless have several alternatives, the first thing to do is set into motion a solution to better your score, as you work to remove those residual overdue debts, either through paying these off or negotiating with the lender, your FICO may gradually improve. The age of 30 day past due, 60 day past due, 90 day past due and sometimes longer, late payments is a factor in determining your FICO.
At the similar time, you may look around for lenders prepared to accept a higher risk by lending you money, the downside is these loans is that they virtually always carry a higher interest rate, your better approach is to try to forego borrowing for as long as possible while you work to improve your debt situation, if you can achieve this your FICO may follow suit.
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