Before you file for a bankruptcy, default on a home mortgage loan, or even letting an unpaid bill to go a collection, consider its impact on your credit, especially your FICO score. FICO (Fair Isaac Corporation) is a commonly used measure of your credit worthiness maintained by the three major credit bureaus and used by financial institutions before approving any credit. FICO score is based on your payment history (35%), amount owed (30%), length of credit history (15%), new credit or searches for credit (10%) and types of credit used (10%).
The score typically ranges between 300 to 850, most require a minimum score of 630 for consideration and a score above 780 considered as an excellent score. A score between 720 and 740 are preferred by many financial institutions. More than 60 percent falls between 650 and 799. If you are a person with a FICO score of 780, a foreclosure of a home will result in losing 120 points. If the score is 680, a foreclosure will drop it by 100 points and it will take three years to earn it back provided you have no any other negative reports recorded. A foreclosure could stay on your credit report for seven years.
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