What does FICO stand for? The FICO scoring model is a credit scoring model originally developed by Fair Isaac Corporation. Fair Isaac Corporation is a company devoted to predictive analytics—in other words, the likelihood that a consumer will act in a specific way. Your FICO score, then, is a three-digit number that shows a lender how you might handle credit.
Ready to learn more? Don’t worry—we’ve got the information you need. We’ll dive into what FICO is exactly, and we’ll give you an insight into what a good FICO score looks like. Because how can you improve your FICO score without knowing what it is?
What Does FICO Stand For?
In a nutshell, FICO stands for Fair Isaac Co. FICO is a scoring model meant to give lenders—and sometimes employers—a pretty good idea of how consumers handle money. FICO scores are based on five factors, which we’ll unpack a little later, and they typically run from 300 to 850. Industry-specific FICO scores sometimes go as low as 250 and as high as 900.
A Brief History of the FICO Score
Fair Isaac Corporation was founded in 1956 by an engineer and a mathematician, Bill Fair and Earl Isaac. Originally called Fair, Isaac and Company, the organization built its first credit scoring system in 1958, just two years after being founded.
FICO debuted its first credit bureau risk score in 1981 and went public in 1987. By 1991, all three major US credit bureaus—Experian, Equifax and TransUnion—were using the FICO scoring system to help banks make lending decisions.
FICO scoring algorithms vary depending on the bureau. Experian uses Experian/FICO, Equifax uses Pinnacle Score (formerly Beacon) and TransUnion uses Empirica.
The most recent FICO scoring system is FICO 10, but many industries still use older FICO models to calculate borrower eligibility. In summer 2021, the most common FICO scoring model was FICO 8—but mortgage lenders often use FICO 2, 4 and 5 to figure consumer creditworthiness.
What Is a Good FICO Score?
Borrowers with good—or higher—credit scores qualify for better interests and a greater range of financial products than borrowers with fair or poor FICO scores. Here are the typical FICO score ranges:
- Exceptional. 800-850
- Very Good. 740-799
- Good. 670-739
- Fair. 580-669
- Poor. 300-579
Credit scores aren’t static—they change according to five distinct factors. So, if you have a fair or poor credit score, you cantake steps to improve it.
What Goes into a FICO Score?
FICO scores are based on five credit-influencing factors—payment history, amounts owed, credit age, new credit and credit mix. Let’s get into it:
What Isn’t Included in a FICO Score?
Lots of things aren’tfactored into your FICO score. Age, gender, religion and other protected characteristics are never part of the algorithm, for instance. Your address, your employment information and whether or not you’re enrolled in a credit counseling program also don’t play into the FICO scoring system.
Until 2018, public records like judgments and lax liens appeared on credit reports. They don’t any more, though—so it follows that judgments and tax liens also don’t make an impact on your credit score. Bankruptcies arestill included on credit reports, however—and they doimpact credit scores.
Do Businesses Have FICO Scores?
Individuals aren’t the only ones with credit scores. Businesses also have FICO scores—specifically, scores generated by the FICO Small Business Scoring Service. FICO SBSS scores range between 0 and 300—the higher, the better. Businesses with higher scores generally land more substantial lower-APR business loans.
Business credit checks tend to be much more rigorous and thorough than personal credit checks. Depending on business type, many business owners qualify for business-related loans based on their personal andtheir business’s FICO scores.
What Is the Difference Between FICO and VantageScore?
FICO isn’t the only credit scoring model out there. Founded in 2006 by all three major credit bureaus, VantageScore represents an alternative credit scoring system. There are four distinct VantageScore iterations, each one designed to make credit more accessible for consumers.
Like FICO, VantageScore tries to predict credit-related consumer behavior. Because FICO and VantageScore use different algorithms to come up with credit scores, your VantageScore will be different from your generic FICO score. VantageScore 1.0 and 2.0 scores ran from 501 to 990, but VantageScore 3.0 and 4.0 scores run from 300 to 850, just like FICO.
How Do I Get My FICO Score?
If you want access to your FICO score, you have a few options. For a general overview of your score, sign up for Credit.com’s credit report card. You’ll see your VantageScore 3.0 credit score and a helpful breakdown of your credit-influencing factors.
If you really want to dig into your credit, choose ExtraCredit instead. Credit.com’s ExtraCredit rolls five useful tools into one—Build It, Guard It, Track It, Reward It and Restore It.
You can use Build It to add tradelines to your credit profile—rent or utility bills, for example. Guard It includes dark web monitoring and ID insurance, so it can help you protect your credit. You’ll see 28 different FICO scores lenders see when you navigate to the Track It module, and you can access personalized credit offers via Reward It. Finally, Restore It offers a discount to a leader in credit repair to help you work to rebuild your credit if the worst happens.
If you’re ready to see your credit score or you want to see what other areas of your credit need your attention, why not sign up ExtraCredit today?
Do you know your credit score?
