Credit Rating Check: What Is It?

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The duration of credit history, which also forms the FICO score, can have a major impact on the score especially if one has a long history of credit.

A credit rating check is frequently done by financial companies such as credit cards and banks on individuals who want to borrow money from them. It is a number that represents the consumer's creditworthiness. It is used to analyze any potential risk that may develop should the borrower not be able to pay his/her loans.

In the United States of America, the FICO score is extensively utilized in a credit rating check. FICO or Fair Isaac Corporation is a publicly listed firm on the New York Stocks Exchange that provides decision-making and analytics services to help financial companies such as banks and credit card companies in making large volume, complex choices. The company was formed by Earl Isaac and Bill Fair in 1956.


The FICO score which is utilized to examine is composed of 35 percent Payment History; 30 percent Credit Utilization; 15 percent Length of Credit History; 10 percent Types of Credits Used; and 10 percent Recent Searches for Credit. The Payment History can cause the FICO score to be dropped if one is late in settling his/her debts but it can also cause the score to be improved if one pays his/her bills on time. A low credit use ratio can raise a FICO score whereas a high credit utilization ratio will decrease the FICO score. A credit usage ratio is a ratio between the current outstanding debt and the total available credit limit.


The duration of credit history, which also forms the FICO score, can have a major impact on the score especially if one has a long history of credit. If a consumer is using several kinds of credit such as revolving, installment, mortgage, and consumer financing, then he/she can enhance his/her FICO score. The number of credit rating checks can minimize the FICO score. If a customer constantly seeks credit in short periods of time then they will note in the credit report which can impact his/her rating. However, a credit rating check conducted by an employer for purposes of employment verification; self-check; and pre-screened offers for insurance or credit, do not have any impact on the FICO score.


The FICO score can range from 300 to 850 with 723 as its median score. 60 percent of the scores are between 650 and 799. In the United States of America, any resident can initiate his/her own rating check for free. The Fair and Accurate Credit Transactions Act or FACT ACT requires that a free credit report be sent to the US resident once a year by the three credit reporting agencies, which are Transunion, Experian, and Equifax. Credit ratings vary varied between the three companies as they use different data.


A credit rating can also be used by insurance firms in pricing their homeowners and auto insurances. If a credit rating check indicates a high credit score then there's a great likelihood that fewer premiums are charged to the consumer because studies show that persons with high credit rating advisory in Delhi have fewer claims. Also, if the credit rating check indicates a high FICO rating then the client might also be granted inexpensive interest rates on loans and mortgages.