How FICO^® Scores Help You

Credit scores give lenders a fast, objective and consistent estimate of your credit risk. Before the use of scoring, the credit granting process could be slow, inconsistent and unfairly biased. Here are some ways credit scores help you.

Get credit faster

Scores can be delivered almost instantaneously, helping lenders speed up credit card and loan approvals. This means when you apply for credit, you'll get an answer more quickly. Today, many credit decisions can be made within seconds. Even a mortgage application can be approved in days instead of weeks for borrowers who score above the lender's minimum score requirement. Scores also allow retail stores, internet sites and other lenders to make "instant credit" decisions. Keep in mind that FICO^® Scores are only one of many factors lenders consider when making a credit decision.

Credit decisions are fairer

Using credit scores, lenders can focus on the facts related to credit risk, rather than their personal opinions or biases. Factors such as your gender, race, religion, nationality and marital status are not considered by FICO^® Scores. So when a lender uses your FICO^® Score, they are getting an evaluation of your credit history that is fair and objective.

Older credit problems count for less

If you have had problems paying bills in the past, FICO^® Scores won't haunt you forever (unless you continue to pay bills late!). The impact of past credit problems on your score fades as time passes and as recent good payment patterns show up on your credit report. FICO^® Scores weigh any credit problems against the positive information to balance against where you're managing your credit well.

Higher scores save you money

When you apply for credit – whether it's a credit card, a car loan, a personal loan or mortgage – lenders need to understand how risky you are as a borrower in order to make a good decision. Your FICO^® Score may not only affect a lender's decision to grant you credit, but also how much credit and on what terms (interest rate, for example). Keep in mind that FICO^® Scores are only one of many factors lenders consider when making a credit decision.

Taking steps to improve your FICO^® Score can help you qualify for better rates from lenders. Generally, the higher your score, the lower your interest rate and payments. The difference between a FICO^® Score of 620 and 760, for example, can be tens of thousands of dollars over the life of a loan.

Take the example of borrowing $230,000 on a 30-year mortgage. A borrower with a FICO^® Score of 760 could pay $221 less each month in interest as compared to a borrower with a FICO^® Score of 630. That's a savings of $79,560 over the life of the loan.

On a $20,000, 48-month auto loan, the borrower with a FICO^® Score of 720 could pay $136 less each month in interest as compared to a borrower with a FICO^® Score of 580. That's a savings of $6,528 over the life of the loan.

Even if your score is low, scores put more credit within your reach

Because scores allow lenders to more accurately associate risk levels with individual borrowers, they allow lenders to offer different prices to different borrowers. Rather than making strictly "yes-no" credit decisions and offering "one-size-fits-all" credit products, lenders use scores to approve consumers who might have been declined credit in the past. Lenders are even able to provide higher-risk borrowers credit that they are more likely to be able to manage.