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Most of us know that we have a credit record that is compiled by several major credit bureau and a particularly important element of your credit record is your FICO score. But what is your FICO score and how does it influence your debt management choices? FICO is formed from the first letters of the Fair Isaac Corporation who worked out this system of credit scoring and it is a number that is generally between 350 and 850 which ranks your credit worthiness according to the proprietary algorithm formulated by the company, with 350 being the worst score and 850 being the best. In spite of the fact that the details of the algorithms are a closely held secret, over the decades a lot of people have be able to word out many of the important elements. For example, any late payments will lower your score and the greater the number of late payments you have and the later these payments are the more heavily the credit score will be affected. Another factor is the total amount of debt that is carried each month. Another not quite so important factor is the number of credit cards you hold and the number of credit checks performed out on your account. Any score of under around 620 is considered as marginal and a score of less than 580 is poor. A score of 720 and above is considered to be very good to excellent. A score that falls between 620 and 720 represents something of a gray area where items other than your simply your FICO score will play an important role in any loan decisions. Mortgage lenders, banks, credit card issuers and others will look at your FICO score as an extremely important factor in deciding whether or not to make a loan. They will also take your score into consideration when deciding what interest rate to charge you. Other things being equal the higher your score the lower the interest rate you can obtain. Often of course all other things are not equal and general interest rates, the current demand for loans, the overall economy and other factors have a significant influence on whether or not lenders will lend and at what rate they will lend. Yet another extremely important factor in the equation noe is the use of computers which has changed the financial industry tremendously over the past 20 years and also provided consumers with far more fast and simple access to products an services through the Internet. Despite all these changes the FICO score remains a main tool for most lenders and, although it may not determine the final decision, it certainly influences the 'first cut' when presented with a pile of applications to either approve or disapprove. Fortunately for those people who are in some financial difficulty there are choices and even if your credit score is not very high you nonetheless have several options open to you. The first thing you should do however is to set into motion a plan to better your score. As you gradually clear those overdue debts by paying them off or by negotiating with the lender your score will slowly improve. And do not forget that the age of your 30 and 60 day past due and late payments is a consideration in computing your score. While you are doing this though you can also look around for alternative lenders prepared to take a higher risk by lending you money. The difficulty of course is these loans nearly always carry a higher rate of interest. If possible your best course of action is to try to forego borrowing for a time while you work to increase your credit score.
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