The Importance of the FICO Score

What is a FICO score and why is it so important? For those in the credit industry, knowing what a FICO score is can help a lot in maintaining a healthy lending business. That is because the FICO score is being used in order to assess a person's credit worthiness. Lending money to people is always a risky endeavor. Lenders always have the fear of never ever getting back the money that they have loaned. And because it is a business, lending institutions can only make a profit if borrowers actually make the payments on the money that they loaned. For them, it is very important to know about an individual's borrowing as well as debt payment behavior before they can ever decide on handing out the money in the form of a loan or other types of credit.

Creditworthiness of an individual is something that lending institutions really want to know before they ever want to decide of loaning any amount of money. And the best way to do that is by knowing the FICO score and what it represents in terms of an individual's credit behavior and pattern. And just what is a FICO score? It is simply a way of being able to measure an individual's creditworthiness without requiring the lending institutions access to an individual's income history or employment status and, in a way, being able to maintain a person's privacy in some way.

What is a FICO score and how did it come to be? It was originally developed by the Fair Isaac Company in order to help the credit industry assess individuals applying for credit. The FICO score is calculated taking into consideration certain factors that determine one's credit behavior. Such factors included in calculating for the FICO score include one's credit history, current credit owed, the length of the credit history, recent loans applied for as well as the various types of credit each individual has obtained. The FICO score is now widely used by major credit reporting agencies in providing lending institutions with a credit report on individuals applying for a loan, getting a mortgage or trying to get approved for a credit card. Credit card providers and banks also use the FICO score in order to determine credit limits and the setting of interest rates.

Before an individual's FICO score can be calculated, he or she must at least have one credit account open and active for a minimum of six months. This is the bare minimum of information that is needed for calculating an individual's FICO score, although it would still be a long way from being considered credit worthy. Most lenders prefer to see an individual having minimum of three or four credit accounts that have been maintained for at least 12 months. This is what banks look for in providing large lines of credit and mortgages to its clients.

What is a FICO score in terms of your credit worthiness? A FICO score is rated at scale from 300 to 850. The accepted median for the FICO score is around 720. FICO scores that are 725 and above are considered good scores while those found below 600 are considered bad. Making sure that one keeps his or her FICO score high would ensure that lenders would approve of credit or loans being applied for.

Encourage Your Customers To Pay On Time - And How To Recover The Debt If They Don't

Whatever sort of business you run, it can be difficult to ensure that your customers pay their bills on time. After all, late payment of debt can cause crucial cashflow problems and non-payment of debt has the potential to effectively cripple your business. But how can you make sure that your customers pay their debts on time? And, if they continue to renege on their payments, how can you go about recovering the debt?

To begin with, it's important to set out clear terms and conditions for your customers to adhere to when they're making their payments. For instance, offering discounts on early payments - and making customers aware of the consequences of non-payment - will definitely encourage bills to be paid on time. On the other hand, charging customers a fee on late payments is sure to encourage your clients to by the agreed deadline. Legally, if your customer fails to pay their bills within 30 days of being invoiced, the amount of interest you'll be able to charge interest daily at the Bank of England base rate plus eight per cent.

Additionally, you'll also be able to claim debt recovery costs when adding interest onto any overdue payments. Your customer is legally entitled to pay you rates of £40 for debts of under £1000, £70 for debts ranging between £1001 and £10,000 and £100 for late payments exceeding £10,000. However, if you choose to claim debt recovery costs, it's vital to let your customers with unpaid bills know in writing than you plan to implement these extra charges.

While these efforts usually provide results in obtaining your payments on time, some customers repeatedly ignore reminders to settle their bills with your business. In this case, the best course to take is usually to employ a debt recovery agency to claim any overdue payments that are owed to you. Debt recovery agencies can offer a lot of advantages when it comes to collecting debts for you.

Firstly, debt recovery agencies have the time, expertise and specialist industry knowledge that are needed to effectively recover any debts that are outstanding to you - so you can concentrate on the everyday running of your business. Often, the agency will also be able to instruct solicitors on your behalf if the customer still doesn't make their payment. Handing over these responsibilities to an external debt recovery agent will leave you free to tend to the everyday running of your business.

Ultimately, if you decide to opt for a debt recovering agency in order to collect any payments owed to you, it's essential to check whether the agency is registered with the Credit Services Association by referring to the CSA's website http://www.csa-uk.com. Choosing a reputable debt recovery agency, like Capquest for example, will ensure that you won't be associated with any questionable practices and will guarantee the fast recovery of your debts.