| Every one knows how FICO or the Fair Isaac | | | | credit utilization over the total credit limits. For |
| Corporation scoring systems work. There are | | | | instance, if a person has total credit limits of |
| however many other types of systems | | | | $80,000, and he used $60,000, then his debt to |
| employed by lending companies when computing | | | | credit ratio is 75%. An ideal percentage should fall |
| one's credit worthiness. But whatever credit risk | | | | between fifty to sixty percent. Making it above |
| system your lender uses, it is important to | | | | sixty increases your chances of becoming a credit |
| always keep a close eye on your credit risk ratio. | | | | risky borrower. |
| Credit risk ratio is the percentage or the likelihood | | | | The third factor is the length of credit history. |
| that lenders will lose because of a borrower's | | | | This is fifteen percent of your credit score. Credit |
| inability to pay on time. Or, in other words, it is | | | | scorers like FICO are not mindful of how long you |
| the odds that banks, lending institutions, or credit | | | | have owed money from someone, but they are |
| card companies will say "NO" to your credit | | | | more interested in your relationship with your |
| applications. | | | | lender. If you have used your credit and stayed |
| A credit risk ratio is not a factor; rather, it is a | | | | with the same credit card company for that long, |
| result of your credit performance. Just like what | | | | that makes you more as a credit worthy |
| was mentioned earlier, the FICO has its own way | | | | borrower. |
| of scoring one's credit worthiness or the ability to | | | | Ten percent of the remaining twenty percent is |
| pay for his credit obligations. The mathematical | | | | based on the combination of credit types you use. |
| formula is secret least likely disclosed, though | | | | Basically, there is the consumer finance, revolving, |
| FICO reveals the factors that may spell | | | | an example is credit card, and installment. If you |
| difference between being a credit worthy and | | | | vary your credit types, you have a big chance of |
| credit risky borrower. | | | | reversing your credit risk ratio. |
| The first factor is the promptness of your | | | | The other ten percent comes from your |
| payment. That makes up thirty five percent of | | | | resourcefulness. FICO awards a full ten percent to |
| your total FICO score. The earlier you pay the | | | | borrowers who are confident to look around for |
| bills, the better. Also, you need to know that | | | | the best interest rates. |
| FICO puts more focus on your recent bills, | | | | Interestingly though, your FICO score will not |
| although your past late payments will also reflect | | | | guarantee you of having a complete credit |
| on your present report. More importantly, a credit | | | | worthy status. Take for example, a person's |
| card account that has been handed over to | | | | current employment or income status. Even if he |
| collecting agencies will definitely hurt your credit | | | | has gained an attractive FICO score, but |
| score. If you're not doing well in this 35-percent | | | | presently has no means of earning income, he will |
| factor, then you are basically raising your credit | | | | still be labeled a credit risk borrower. That |
| risk ratio. | | | | person's credit applications will most probably still |
| The other factor is the debt to credit ratio. This | | | | be denied. High credit risk ratio is not something |
| accounts for thirty percent of your total FICO | | | | you would want to earn, so be extra watchful |
| score. This rating is obtained by dividing your | | | | when you use your credit cards. |