What is a FICO Score?
A FICO score is a credit score developed by FICO, a company that specializes in what’s known as “predictive analytics,” which means they take information and analyze it to predict what’s likely to happen.
In the case of credit scores, FICO takes credit information and uses it to create scores that help lenders predict behavior, such as how likely someone is to pay their bills on time (or not), or whether they are able to handle a larger credit line. Scores developed by FICO can also be used to forecast which accounts are most likely to end up included in bankruptcy, or which ones are likely to be most profitable. And credit-based insurance scores, which they also create, are used to help insurance companies identify which customers are least likely to file claims.
What Does FICO Stand For?
Similar to the way Federal Express eventually became FedEx, the company that develops FICO scores used to be called Fair Isaac Co. It was often shortened to FICO and a few years ago that became the official name.
To create credit scores, they use information provided by one of the three major credit reporting agencies – Equifax, Experian or TransUnion. But FICO itself is not a credit reporting agency.
Though FICO scores are the most widely used among lenders, there are other scores lenders can choose from, such as the VantageScore which is becoming more widely used.
What Goes Into FICO Scores?
The FICO score range is 300 – 850, with the higher number representing less risk to the lender or insurer. Consumers with high FICO scores (usually around 760 or higher, though every lender is different) are likely to get the best rates when they borrow, as well as the best discounts on insurance.
There is a popular FICO score chart that describes the main factors that go into these scores:
Payment History (35%)
Debt/Amounts Owed (30%)
Age of credit history (15%)
New credit/inquiries (10%)
Mix of accounts/types of credit (10%)
All of these factors are considered in other credit score models, so it’s safe to say that if you have a strong FICO score you likely have a good score with other models as well. When you check your credit score, don’t get too hung up on the specific number. Instead, focus on what areas of your credit are strong and which ones you might want to work on.
How to Get Your Credit Score
With Credit.com’s free Credit Report Card you will get a free credit score from Experian & VantageScore. This is not a trial offer, and there is nothing to cancel.
You can also purchase a FICO score online and you should also get a disclosure that includes this information if you are turned down for credit or charged more by a lender.