As Orwellian as it might sound, there is indeed an all-seeing and all-knowing entity out there determining the nature of the privilege’s society affords you.

It’s called a FICO score, and this is why yours matters.

What’s a FICO Score?

Created by the Fair Isaac Corporation, some 90 percent of the top lenders rely upon FICO scores to make credit-related decisions.

Remember when you were in school and teachers were always saying something would go on your permanent record? Well, it turns out that one didn’t matter so much. But this permanent record can absolutely have an impact on the quality of your life—regardless of your income level.

How is it Calculated?

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FICO scores range from 300 to 850. The higher the number, the lower the perceived risk to a lender or an insurer.

In order for your score to be calculated, you must have at least one credit account that has been open for six months or longer, and at least one account that has been reported to a credit bureau within the last six months.

Given we’re talking credit here, you’ve probably already guessed the most significant factor is your payment history.

Your payment history accounts for 35 percent of your total ranking. Pay regularly and on time, you’ll get a higher score; do the opposite and, well, you won’t.

In addition to whether you always pay on time, the percentage of your available credit being used is taken into consideration.

Read also: 7 Tips to Improve Your Credit Score

The more debt you have outstanding, the lower your FICO score.

The less debt you’re carrying, the higher your score. This accounts for 30 percent of your standing.

The length of your credit history also comes into play. The longer your track record, the more favorably you’re looked upon—if you’ve been paying regularly. This factor encompasses 15 percent of your assessment.

The types of credit you use comprise another 10 percent of your ranking. This can include credit cards, installment loans (such as car loans) and mortgages.

The last factor is how often you apply for credit. If you’re doing it a lot, you’ll trigger a red flag. This consideration accounts for 10 percent of your FICO score.

Why Does It Matter?

Your FICO score can be a determining factor in whether you get an apartment, a home loan, student loan, a car loan, a credit card and insurance.

Further, while your score isn’t considered directly, negative information on your credit report can also determine whether you’ll get a job.

When it comes to lending, a good score grants you easy loans. And yes, a bad score might get you a loan anyway—but you’ll pay a significantly higher interest rate.

Long story short, FICO scores matter.

If You’re Having Financial Problems

If you’ve fallen behind on your debts, odds are your FICO score has already taken a pretty good hit. The best way to bring it back is to resolve your debts and start building your credit score up again.

A good way to do this is to negotiate more favorable repayment terms with your creditors so you can pay your debts off as soon as possible.

Working with a debt settlement firm like Freedom Debt Relief can help you accomplish this.

While they can’t improve your credit score, they can help you get your situation back on track, so you can do so. To choose one with which to work, look for information like these Freedom Debt Relief reviews to ensure you’re considering a reputable firm.

Your Permanent Record Is Real

So yes, it turns out there really is a permanent record about which we need to be concerned. This is why your FICO score matters. However, using credit responsibly will make it much less of a worry.

There really is a permanent record about which we need to be concerned. Here's why your FICO score matters and how to calculate it: #ficoscore #ficoscoretips #finance #financetips #credittips