A lot of people confuse themselves between FICA and FICO when referring to credit scores. Actually, there is no such thing as FICA credit score. It is only FICO when talking about credit scores.
FICA is the acronym for Federal Insurance Contributions Act. This act is the result of the Social Security Act of 1935 which was proposed by the late president Franklin D. Roosevelt. It mandates that an employer should set a specific amount from the employee’s salary and contribute it to a government account known as Social Security Trust Fund. The funds gathered were to be used to provide retirement income, disability insurance, Medicare and benefits for survivors.
On the other note, FICO score is a numerical value that measures the capability of a person who would like to lend money from a financial institution to pay his debts or bills. FICA scores are compiled by a company named Fair Isaac & Co. This company began developing FICO credit scores in the latter part of 1950s. Currently, many lenders and other financial agencies are using FICO scoring to decide as to whether they would grant loans or other credit application to borrowers.
The FICO credit score ranges from 300-800 where 300 is very poor and 800 is very good. The average FICO score is 568. Borrowers with FICO Scores that are above 568 are capable of paying their bills whereas those with lower than the average FICO score are not. Lenders or other financial institutions give favor to borrowers with a good FICO score by allowing them to lend money or incur a loan. Those with very good FICO score are privileged to borrow a greater amount of loan, if they wish to, without any hassle. Those with poor FICO scores would find it hard to apply for any credit line and would have higher interest rate (If the credit application is approved). This is the beauty of having a good FICO score.
The creation of a FICO score is based on different factors. The score notes whether the consumer pay his/her bills on time, how long the consumer lived in a certain address, whether the consumer filed a bankruptcy, employment history and the length of the credit history.
There are three major bureaus that reports FICO scores. These are TransUnion, Equifax and Experian. Small credit bureaus also exist and they only provide information to local areas. Lenders or other financial institutions collaborate with these bureaus to determine the creditworthiness of borrowers. Some of them use the three bureaus while some just the TransUnion.
By law, consumers can get one copy from these credit bureaus once a year. If there are any discrepancies, consumers can call these bureaus for any concerns.
There are many ways on how to increase the FICO score. Consumers should pay their bills on time, avoid applying for credit cards frequently, having a sufficient credit, and avoid high balances on credit cards.
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