Lenders in India use credit scores from either of the 4 credit bureaus - Experian, Equifax, TransUnion CIBIL™, or CRIF Highmark. FICO Score has recently forayed into the Indian lending market, offering lenders with a more comprehensive evaluation of the borrower’s credibility.
What Is A FICO Score?
FICO score is a score that is based on your credit history and helps lenders assess your creditworthiness. Each of the three credit bureaus — Experian, Equifax and TransUnion — generate a FICO score for consumers. The score range is 300–850, with a higher score indicating a better credit history.
FICO scores are calculated using a complex algorithm that takes into account factors such as the number of accounts, the amount of past due and current accounts, the length of the current accounts and more.
FICO score has been recently introduced in India to offer lenders a more comprehensive assessment of your creditworthiness. This considers other factors like your digital footprint, social media interactions and other spending activities to derive a more accurate credit score.
What Is Considered A ‘Good FICO Score’?
A good FICO score is one that is close to the maximum score of 850. In general, the higher your score, the better your creditworthiness. A good FICO score will help you get the best terms on a loan or a credit card, and can even help you get a lower interest rate on your current accounts. A good score is usually considered to be in the range of 700–749.
What Are The Factors Determining My FICO Score?
The factors that influence your FICO score are varied. They include the number of credit accounts, the amount of past due and current accounts, the length of the current accounts and your level of credit utilization. Your credit utilization is the percentage of your available credit that you have used. Your credit mix is the mix of different types of credit.
Your FICO score is determined by a complex algorithm that takes into account factors such as the number of accounts, the amount of past due and current accounts, the length of the current accounts and more. The formula used by the algorithm varies slightly between the three credit bureaus, but generally speaking the higher the number of accounts you have, the higher your score will be. The amount of past due and current accounts also affects your score. The longer the current accounts, the higher your score will be.
The 5 key factors that influence your FICO Score are -
1. Payment History (35%) - This considers your payment history on your existing credit accounts. The formula takes into account your payment history on your accounts ranging from credit cards to loans and determines your rating based on that.
2. Total Outstanding Amount (30%) - This considers the amount of credit you have available to you. The formula takes into account the total amount of your credit available to you, ranging from your available credit limit on your credit cards to your available borrowing on your loans and determines your rating based on that.
3. Length Of Your Credit History (15%) - The longer your credit history, the higher your credit score. Even though the length of your credit history only accounts for about 15% of your credit score, it can be a difficult measure to manage, especially if you're new to credit. Although you cannot go back in time and create credit reports, you can improve your credit score by keeping your oldest accounts active and in good standing.
4. Credit Mix (10%) - A healthy credit mix should include a credit card, a personal loan, a home loan, and a line of credit, among other things. This credit diversity demonstrates to lenders that you can effectively manage a variety of credit types.
5. New Credit (10%) - Multiple applications for new credit can be detrimental to your FICO score. Lenders want to see that you're responsible and able to pay your bills on time. If you apply for new credit cards or loans very frequently, it may be a red flag to lenders that you have difficulty managing your finances.
Additional Read: Key Factors That Decide Your Credit Score Card
Where Can One Find Their FICO Score?
Knowing your FICO score can help you gain control of your finances and prepare for the loan or credit card application process. Fortunately, there are several methods for determining your credit score, which begin with an examination of your credit card bills and the website of your credit card issuer. Many providers offer free FICO scores on a monthly basis, and some even offer the service to non-cardholders.
You can also visit the FICO website and sign up for one of three monthly subscriptions that include FICO scores, credit reports, identification monitoring, and other features.
FICO In India
In collaboration with Lenddo, FICO, a well-known credit-scoring firm in the United States, has released 'FICO Score for India' and FICO Score X Data India, a dynamic data scoring. FICO score and FICO Score X Data are credit scoring systems that allow Indian lending institutions to more accurately estimate risk.
According to a World Bank survey, more than half of India's working population is either underbanked or financially excluded. FICO's non-traditional credit rating approach may give Indian lending institutions more leeway to extend credit to previously not-so-creditworthy customers due to a lack of credit history, advancing the government's financial inclusion initiative.
FICO's twin rating solution, which combines FICO Score X Data and FICO Score, is a better risk evaluation methodology that takes into account a variety of risk factors. This enables lenders to improve their credit ratings and expand their portfolios without increasing the risk of default.
The FICO score is calculated using data from other reputable credit reporting agencies in India. FICO Score X Data India, by contrast, is derived from unconventional info such as a person's online behavior, phone logs, and social media networks.
FICO score can be a great alternative to credit score as it offers better understanding of borrower’s credibility.
FICO Score FAQs:
1:What is a FICO Score?
FICO – Fair Isaac Corporation Score, is a credit score system that is very popular and well-established in the US. They have recently forayed into the Indian market to offer a better credit rating system for lenders.
2:What is the FICO Score range? What is considered an ideal FICO score?
FICO score ranges from 300 – 850. A score above 650 is considered good. A score above 700 is ideal to get the best loans.
3:Are Indian lenders using FICO score or CIBIL™ score?
While CIBIL™ has been an established credit scoring system in India for years, FICO is slowly becoming popular with lenders. FICO uses more parameters to score an individual and that is proving beneficial to lenders and borrowers to get credit easily.
4:What are the factors determining my FICO Score?
An improved risk evaluation methodology that takes into account a number of risk factors is provided by FICO's twin rating solution, which combines FICO Score X Data and FICO score. This enables lenders to increase their portfolio size and approval ratings without increasing the risk of default.
Information from other trustworthy credit reporting agencies in India is used to calculate the FICO score. FICO Score X Data India, on the other hand, is based on non-traditional data, including a user's social networks, digital footprints, and cell phone records.
5:Is 690 a good FICO Score?
Yes, 690 ranges in the ‘good FICO score’ range, and get you the best loans and interest rates.