With the current economic recession and high unemployment rates, one would think the current average FICO score would be lower than in better economic times; however, the current average FICO score is 723!

According to Fair Isaac Corporation, the leader in Decision Management, who began its pioneering work with credit scoring in the late 1950s, the latest scores of Americans say something different than what the media is talking about!

The FICO score concept was developed to help Creditors determine the likelihood that you will pay your bills. Since its inception, the FICO method of credit scoring has been widely accepted by lenders as a reliable means of credit evaluation.

In order to determine your FICO score, several factors are taken into consideration including, but not limited to, the following:

• • Negative credit information such as collections, late payments and bankruptcies
  • The amount of credit used versus the amount of credit available
  • Length of time credit history has been established
  • Length of time at your present residence

There are three FICO scores computed considering data provided by each of the three credit bureaus…Equifax, Experian and Trans Union. Lenders may use one or all three of the scores while other lenders may use the middle score. Although many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single cutoff score used by all lenders and there are many additional factors that lenders use to determine your actual interest rates.

Scores normally range from 500 (high credit risk) to 800 and above (low credit risk). It is important to check your credit report regularly to ensure it does not contain errors which may adversely affect your FICO score. Any errors should be reported immediately to the three credit bureaus, all of which have procedures for correcting information.