Fico Score Credit Score

Fico credit score is a number from 300-850 that represents the risk of lending you money. Fico is the result of a complex mathematical formula that takes into account many items from your credit report.

Many different credit scores exist, but FICO is the dominating credit score – more than 90% of all creditors are relaying on FICO for making their lending decisions and determining your terms.

Your FICO score is the single most important number in your financial life, because it determines your financial future. Not only it determines whether or not you can obtain credit, it also sets the terms and interest rates you’ll be offered.

A bad FICO score can cost you thousands of dollars in excess payments and higher interest rates (See this example). Furthermore, now days credit checks are also performed by insurance companies, potential employers (to determine your financial responsibility), landlords that check potential renters and more.

With that in mind – Understanding FICO score doesn’t just make sense – it makes Dollars!

• Payment History – 35%
  Are you paying your bills on time? Have you ever been late? Do you have account in collection? Is there a judgment or lien against you? Have you ever declared bankruptcy?
• Credit Utilization – 30%
  The more you utilize your available credit – the lower your score will be.
• Credit File Age – 15%
  The longer your credit history is, the higher your scores will be.
• Credit Diversity –10%
  The more different types of credit you handle (e.g. school loan, mortgage, car loan, credit cards etc), the higher your score becomes.
• Credit Inquiries – 10%
  The more you search for new credit, the lower your score becomes.

For a comprehensive drilldown into how these factors affect your FICO score please see FICO Score Formula.

Who Makes Fico Scores?
There are 3 national credit reporting agencies, namely Equifax, Experian, & Trans Union. These credit bureaus collect consumer information in personal Credit Reports. This information used to generate personal FICO scores, which are sold to potential creditors. Whenever you apply for credit, the potential creditors pulls your credit reports and scores from the credit bureau of their choice (just one, two or for the most part all three credit bureaus) and review them as part of the lending decision.

What is a Good FICO Score?
In General, a FICO score of 680 and higher is considered good. But things are a little more complicated, as explained in details here.

Where Can I Get My FICO Score?
Under the Fair Credit Reporting Act (FCRA) which regulates the consumer reporting industry, you have a right to receive Free Annual Credit Report from each of the 3 major credit bureaus every 12 months. Your FICO score however is not included. FICO scores are sold to consumers by myFICO.com (see ../free-annual-credit-score/ for details).

Suggested Reading
FICO Score Formula
Understanding Fico Scores
How Things Affect Your Credit Score