Credit scores and FICO scores

FICO scores are calculated as per the Fair Isaac & Co. Credit scoring system. It is used to determine the potential of the consumers on paying their bills. Fair, Isaac invented this theory when he worked on this system in late 1950's. Creditors are largely accepting this theory for evaluating a person's financial history. The widespread account history of a consumer is condensed into one single three digit number. How the FICO scores are calculated by the credit bureaus is still an unknown mystery although the Federal Trade Commission has shown this to be acceptable.

Credit scores are determined by putting into use the various scoring models and mathematical calculations that boil up to some specific points. Numerous pieces of information are collected before the credit score is awarded to the consumer. The credit scores help in depicting a true picture of the credit performance of an individual. Credit bureaus are assigned as the models for calculating the three digit scores of the individuals.

Extensive research is done on the following avenues before the credit scores are awarded.

• The financial record showing the history of late payments.
  
  
• Time taken while credit was established.
  
  
• The ratio between credit used and credit available.
  
  
• Total time period in the present address
  Your employment history
  
  
• Any sort of negative information available in your credit report.
  

• It is necessary to make payments on time.
  
  
• Avoid applying for credit at frequent intervals.
  
  
• The balance in the credit card should be reduced to the minimum
  
  
• Obtain additional credit in case if you are going through limited credit. Limited credit can also hurt your credit scores.