Latest / Credit Nurse: CPR for your Credit Score / Decoding FICO 8: Your Guide to Better Credit Health

Transcript

Decoding FICO 8: Your Guide to Better Credit Health · Credit Nurse: CPR for your Credit Score

• 0:00
  Speaker 1: Welcome to the credit Nurse. I'm your host, Nurse Nancy.
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  Speaker 1: Understanding your credit score is crucial, and one of the
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  Speaker 1: most widely used scoring models is FICO eight. FICO or
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  Speaker 1: the fair ISAAC Corporation, develop this scoring system to help
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  Speaker 1: lenders assess the credit worthiness of potential borrowers. But what
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  Speaker 1: exactly does FICO eight do and why should you care.
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  Speaker 1: FICO eight scores range from three hundred to eight hundred
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  Speaker 1: and fifty, with higher scores indicating better credit health. This
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  Speaker 1: model takes into account various factors, including payment history, amounts owed,
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  Speaker 1: length of credit history, new credit, and types of credit used.
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  Speaker 1: Each of these elements plays a role in determining your score,
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  Speaker 1: with payment history having the most significant impact. Essentially, the
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  Speaker 1: better you manage your credit, the higher your FICO eight
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  Speaker 1: score will be. One interesting aspect of FICO eight is
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  Speaker 1: how it treats late payments. Unlike previous versions, which penalized
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  Speaker 1: you heavily for a missed payment, FICO eight is a
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  Speaker 1: bit more forgiving if you can demonstrate that you've made
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  Speaker 1: strides to improve your payment habits afterward. This is great
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  Speaker 1: news for those who may have stumbled in the past
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  Speaker 1: but have since worked hard to get back on track.
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  Speaker 1: Another thing to note is that FICO eight is particularly
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  Speaker 1: sensitive to high credit card balances. If you're using a
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  Speaker 1: significant portion of your available credit, it can negatively affect
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  Speaker 1: your score. That's why it's often recommended to maintain a
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  Speaker 1: utilization ratio ideally below thirty percent to showcase responsible credit use. Additionally,
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  Speaker 1: FICO eight even takes into account your overall credit profile.
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  Speaker 1: For instance, it differentiates between a few missed payments on
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  Speaker 1: an otherwise pristine record and a history filled with late payments.
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  Speaker 1: This nuance means that there's always hope for improvement, and
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  Speaker 1: it's absolutely worth monitoring your score. If you're interested in
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  Speaker 1: tracking your credit and getting more insights into how FICO
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  Speaker 1: eight factors into your overall financial health, I encourage you
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  Speaker 1: to check out some credit monitoring services. Many of them
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  Speaker 1: provide valuable resources and information that can help you stay
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  Speaker 1: on top of your credit score and work toward financial goals.
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  Speaker 1: You can find a great tool that I often recommend
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  Speaker 1: write in the description of this episode. So there you
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  Speaker 1: have it. FICO eight is a key player in determining
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  Speaker 1: your credit score and understanding it is the first step
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  Speaker 1: toward managing and improving your credit health. Remember your credit
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  Speaker 1: story is always being written and small changes can make
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  Speaker 1: a big difference over time. Thanks for joining me today
• 3:06
  Speaker 1: on the Credit Nurse, and until next time, take care
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  Speaker 1: of your credit health.