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