If you are thinking of applying for a loan, it will be a good idea to first check your FICA score. This will give you an indication whether you’ll get a credit and on what terms.

Your FICA score is a 3-digit numerical index which represents an estimate of your financial credit worthiness.

It is based on a subset of the information in your credit report, typically from the three major American credit bureaus: Equifax, Experian, and TransUnion. Though the scoring system used by all three credit bureaus are different but all point to one conclusion and that is whether or not you have good or bad credit.

Creditors or lenders, such as banks and credit card companies, primarily use FICA credit scores to determine credit limits and interest rates every time when you apply for new credit card, mortgage, auto loan, personal credit line or any other credit issues by the bank.

Is 700 a Good Credit Score?

FICA score ranges between 300 to 850. The higher is your credit score is, the lower the risk is to the lenders and the easier you’ll obtain a loan, so to speak. A low score, such as 500, could result in much higher interest rates or having your application rejected outright. Conversely, those with a credit score of 760 – 850 would get the most favorable interest rates.

If your credit score is on the low side, loans can be tough to obtain and can cost you thousands of dollars more than they would if you had a decent score. Needless to say, getting home loans (mortgages) with a 500 credit score is almost impossible nowadays.

According to Providian Financial executive J. Christopher Lewis, consumers could save $16 billion just on credit card finance charges if they raised their average score by 30 points.

In general, your FICA credit score represents the likelihood that you’ll pay your debts or default on your loan. A low FICA score means banks and other financial institutions may deny credit, charge higher interest rates, demand more collateral, or require extensive income and asset verification.

As such, every credit and lending decisions are based on an individual’s FICA credit score. It’s one of the most important factors to evaluate how much risk you are as a borrower.

What’s In FICA Score?

A credit score can be broken down into 5 components, some carry more weight than the others.

Since the bulk of your credit score comes from your payment history and the amount you owe, it’s important to keep a healthy balance and ensure that you always make your payment on time.

For you to be eligible for a loan that you will pay back with a fair interest rate, pundits in the credit world advice that the best FICA score should be 700 and above.

The question many people are asking is how easy is it to achieve such a score? Considering the fact that 60% of Americans have managed to achieve the score, it makes it very easy for everyone.

The secret lies in remitting your debts and bills on time as you will avoid paying late fees, which tend to impact negatively on your credit report.

Sadly, many people cannot achieve this score, not because they don’t pay monthly minimums on time, but because they can’t resist the temptation of not exceeding their credit card limit.

They argue that they can pay the monthly minimums and get away, but the interest incurred is what makes the difference. When you delay in paying, it will be marked “unpaid“, and will then reflect permanently on your final report.

It’s Now or Never! Fix Your Credit & Improve Your FICA Score

Finding yourself in a credit debt quagmire could easily have been circumvented if you could have observed your expenses. The only way out therefore is to do all you can to offset the debts, whether it means cutting down on expenses, selling off some valuables, working overtime or better still getting a second job. You can even seek assistance from relatives and friends, at least you will be guaranteed of no interest charge.

The biggest problem Americans are facing today is housing crisis and if you are one among the many who are unable to pay for it, be sure it has a negative impact on your credit score. Having established what a credit score is, it therefore is upon you to see to it that you maintain a good score. You may seek advice from financial advisers on how to do it, but you play the biggest role by sticking to the advice.

Each lending institution has its own unique way of measuring a credit score. Conversely, even though it is said that 700 is the best score, there is no set amount to clearly define a good credit score.

The 700 score is just an acceptable figure established through out the years – by looking at the trends at which most lending institutions applied while evaluating loan applications. Until a particular figure is standardized therefore, everyone should strive to attain the 700 and above mark.

Perhaps the question you’ve always been asking yourself is “What is considered a good credit score?”

Well, there is no stipulated pass or fail mark in regard to credit report, but creditors have set 700 to be a good credit score. Thing is, 60% of Americans are capable of achieving this, hence shouldn’t be difficult for anyone else.

Make a habit to review your credit report and always endeavor to get a credit score of above 700, as that is what is ideal for creditors. Now that you know how to read a credit report and understand the three figures that appear on it, you can improve your FICA credit score by ensuring you pay your outstanding debts on time.

Ways to Improve FICA Score

Understanding your credit score and taking the right steps to get your FICA score in the higher ranges are vital to your overall financial health.

Here’s a list of ways to improve your credit score

1. Always pay your bills on time
2. Keep your balance low in relation to your available credit – 35% or lower is ideal.
3. Make more than the minimum payment
4. Pay off credit card debt rather than moving it around to other cards
5. Don’t open a lot of new accounts over a short period of time, especially if you have a short credit history
6. Get FICO Score Watch® Free Trial Now!

Keep in mind that your FICA credit score can change from time to time, therefore it’s recommended that you monitor your FICA scores and credit reports regularly – at least once a year – whether or not you plan to apply for a loan.

And it’s equally important to take every possible steps to improve your FICA score and be proactive to keep the score above 700 which is considered a good credit score.