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When you want to apply for a loan or apply for credit of any type, every money lender will ask you for your credit score or what is known as FICO score. Fico scores were launched by a company called Fair Isaac Corporation. Your Fico report essentially is the gist of your financial transaction at any given time.

So how really is your Fico score calculated? Fico has a score system ranging from 300 to 850 points. There are many contributing factors in deciding your score. If you have a score above 700, you are good in the money lender`s books as the future borrower.

If you have a score of 650 or below, then you are considered to have a bad credit history and it might be difficult for you to apply and obtain loans in the future if you do not repair your scores. The scores are given based on the two most important things of your financial transactions, that is, your outstanding credit balance and all your previous payments.

The distribution of your credit scores is as follows: Your previous payments will account for 35 percent of your total credit score; all pending payments or outstanding credit accounts for 30 percent of your score; 15 percent of your score holds for the period of time you have taken the credit; 10 percent of your scores stands for all new credit applications; and finally 10 percent of your scores account for the kind of credits you have taken in the past. All these factors are compared with thousands of others requesting for a Fico score and then you get your score result.

When you know how to read your Fico scores, it becomes easy for you to understand what is making your scores go down. You can work on that and repair your credit, to have a healthy financial record.

Your Fico scores will only be calculated at the time when it is requested so the most recent financial transactions are the most important ones. Making sure that the outstanding balance of your credit cards and all your bills are cleared by the due date at all given times. That way, whenever your Fico scores are calculated, your timely payments are reflected.

When does a Fico score go bad? This happens when you do not pay your bills in a timely way and also your scores are affected if you have ever applied for bankruptcy. All your old outstanding balances will also matter when your scores are being calculated, so making sure they are all cleared off is important too. But because your Fico scores reflect the most recent financial transaction, you should handle all your recent loan repayment cycles and bill payment cycles very cautiously. Any number of recent late payments can easily get your scores down.

Fico scores can easily be obtained through internet or by signing up for any credit report company. Reading your Fico score at least once in every six months is a very healthy financial habit. It will help you realize your financial situation and puts you in a better position to plan your future.

†Credit scores are used to represent the creditworthiness of a person and may be one indicator to the credit type you are eligible for. However, credit score alone does not guarantee or imply approval for any credit card product. uses a FICO® Score, which is one of many different types of credit scores. A creditor may use a different score when deciding whether to approve you for credit.