Yahoo Finance talked to Mark Greene chief executive at Fair, Isaac & Co about how consumers can improve their FICO scores.

photo credit: ohdarling

The FICO score is created by analyzing the consumer's debt, how long they've had the debt, how much credit is being used, "If you're close to the edge on your credit cards, that's a danger signal," and where the debt is...is it all on credit cards or is it a mortgage and car loans- which scores better on the FICO scale.  The numbers are plugged into the formula and your FICO score is created.

FICO scores range from 300 to 850, higher is better, the average US score is approximately 700. Greene says that banks use the FICO score as only one of several indicators before lending money. "Lenders should also be taking into account borrowers' background references, their capacity to repay loans, and collateral."

What can you do to improve your score?  "Greene outlines three key ways through which people can improve their scores. "First, pay your bills on time. Second, don't get close to the edge and don't use more credit than you really need.  And third, don't apply for new credit unless you absolutely have to." stated Yahoo Finance.

Bankruptcy and foreclosure cause the most damage to your credit rating. "One thing people should know is that a foreclosed home or personal bankruptcy is the most severe harm that you can do to your credit score," Greene says and it can take up to seven years to repair the damage.

FICO scores are being used today by more than just banks.  Companies are looking at FICO scores as part of the hiring process and insurance companies are using them when you apply for health or car insurance. "People who are good with their finances frequently turn out to be good drivers." says Greene.

Consumers can go to myFico.com to obtain a copy of their score, the report is free, but you must pay to register on the site.

Read the full story by Daniel Gross on Yahoo Finance

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Posted in Education And Training, MBI Headlines, Buyer Resources, Real Estate Market Conditions

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