When you apply for a line of credit or a loan, you are usually asked for your “FICO” score. Fair Isaac Corporation (FICO) is a publicly traded company that offers a service to financial institutions to underwrite the risk of granting a line of credit or loan called a credit score. Take the time to read how FICO helps businesses evaluate their customers (you) -http://www.fico.com/en/FIResourcesLibrary/Predictive_Analytics_2025BR.pdf. You may or may not agree with their modeling systems but it is the most popular in the US. FICO scores are used by the three largest credit agencies in the US—TransUnion, Equifax and Experian.
FICO scores range from 300 to 850. The higher the FICO score, the better. The “acceptable” score depends on the industry and type of credit requested but is usually around 650. A score lower than 650 triggers higher interest rates, more collateral, down payment and a royal welcome to the world of sub-primers.
According to Wikipedia, the FICO risk score (its stated design objective) “is to predict the likelihood that a consumer will go 90 days past due or worse in the subsequent 24 months after the score has been calculated. The higher the consumer’s score, the less likely he or she will go 90 days past due in the subsequent 24 months after the score has been calculated. Because different lending uses (mortgage, automobile, credit card) have different parameters, FICO algorithms are adjusted according to the predictability of that use. For this reason, a person might have a higher credit score for a revolving credit card debt when compared to a mortgage credit score taken at the same point in time.”
If you do not know your credit score, make sure and request a copy from the credit agencies (provided at no cost to you thanks to the Fair and Accurate Credit Transactions Act (FACT) at AnnualCreditReport.com. Look them over since you may find accounts you had closed, balances that you paid off and a number of other inaccuracies. You can have them fixed yourself or hire one of the credit agencies TransUnion (http://www.transunion.com/), Equifax (http://www.equifax.com/home/en_us) or Experian (http://www.experian.com/) for a fee, no doubt. Best of luck.