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FICO Scores Guide

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FICO

When you hear the word “FICO,” your mind undoubtedly goes to credit scores. In fact, there’s a good chance you think all credit scores are simply FICO scores — that’s how synonymous the analytics company’s name has become with the credit scoring models it pioneered. But that’s what FICO really is: an analytics software company that designs algorithms to predict consumer behavior. Its de facto speciality? Assessing a prospective borrower’s ability to repay a loan as agreed via its eponymous scores. Confused? Let’s break down what you need to know about FICO.

What Is FICO?

FICO is a global provider of analytic, software and data management products and services, specializing in the credit analysis market. It is a pioneer in the credit score and credit account management fields, mainly providing credit scoring models and results to banks, credit reporting agencies, credit card processing agencies, insurers, retailers and health care organizations. FICO focuses on three key areas: applications, scores and tools.

FICO was founded in 1956 as Fair, Isaac and Co. by engineer Bill Fair and mathematician Earl Isaac. FICO sold its first credit scoring system in 1958. In addition, 1987 was a banner year for the company. That year, FICO went public, and the firm also introduced the first general-purpose FICO score. The company’s stock is publicly traded on the New York Stock Exchange, under the symbol FICO. Here are some other important FICO facts:

What Is a FICO Score?

Consumers will be most familiar with FICO for their FICO scores, because, yes, there is more than one. In fact, there are currently nine generations of FICO’s three-digit credit scores with more than 60 of them in play in the credit marketplace. Why so many? FICO has one general-purpose credit score per major credit reporting agency — Equifax, Experian and TransUnion. It also has industry-specific scores for each bureau, meaning there’s a FICO credit card score, a FICO mortgage score, a FICO auto loan score and so on and so forth for Equifax, Experian and TransUnion.

These scores have evolved over time. The latest incarnation, FICO 9, for instance, was announced in 2014. Unlike its predecessors, FICO 9 ignores paid collections accounts and gives less weight to unpaid medical debts, since they’re an unplanned expense over which the debtor has little control.     

A Brief History of the FICO Score

FICO introduced the original FICO Score with Equifax in 1989. By 1991 all three national consumer reporting agencies were selling the score to lenders. In the process the score revolutionized the way lenders and other businesses assessed consumer credit risk. Because it considers only credit histories, the score offered a fair and objective risk assessment that ignores subjective factors. By assessing a person’s general risk of repayment, the score proved useful to lenders throughout their relationship with consumers – from new loan decisions to account management decisions.

The score also proved useful to creditors in other industries such as retail goods and telecommunications services. And by providing the first risk assessment consistently scaled across all three agencies, the FICO score made it easier for lenders to tap more than one agency and accelerated the speed with which they could assess risk and make credit decisions. As a result, more consumers gained faster and more convenient access to credit, including people who previously would have been denied credit for subjective reasons.

Since the initial score’s debut, 100 billion FICO credit scores have been sold. According to its website, the company currently services more than half of the top 100 banks in the world, 95 of the 100 biggest U.S.  financial institutions, all of the 100 largest U.S. credit card issuers and more.

How Do I Understand My FICO Score?

Most FICO credit scores follow the same FICO score range of 300 to 850. (The higher your number, the less risky you’re considered.) Plus, they’re also all generally built on the same major factors:

  • Payment history, accounting for 35% of your score
  • Credit utilization, or the amount of debt you owe, accounting for 30% of your score
  • Credit age, or length of credit history, accounting for 15% of your score
  • Credit mix, accounting for 10% of your score
  • Credit inquiries, accounting for 10% of your score

These categories also carry weight across non-FICO credit scoring models, the most notable being VantageScore, whose 3.0 model also follows a range of 300 to 850. So, in short, it is possible to get an idea of whether you have a good FICO credit score or not, even if you’re not looking at the same credit score as your lender. Having said that, you can learn more about what goes into calculating a FICO credit score specifically.

What Is a Good FICO Score?

Again, there are lots of different FICO credit scores out there — and lots of credit scores in general — but when it comes to assessing your credit-worth, the following tiers typically apply:

  • Excellent: A score of 750+
  • Good: A score of 700 to 749
  • Fair: A score of 650 to 699
  • Poor: A score of 600 to 649
  • Bad: A score below 600

Do I Have to Know My FICO Credit Score?

Given how many credit scores there are in play, it’s impossible to know at any given time which one a lender is going to be looking at. That’s why, when it comes to monitoring your credit score, a good strategy is to pick a single consumer-facing credit score and check it regularly to see your progress. It’s also a good idea to focus less on the three-digit number at the top and more on the information that’s getting flagged on your credit report. So, for instance, if you see high credit card balances, you may want to pay them down to improve your scores across the board. Or, if your credit report is covered in inquiries, you may want to hold off on applying for new loans for a while to protect all of your scores from further dings.  

You can view your free credit report snapshot on Credit.com. The snapshot will show you two of your free credit scores and also provide information on what can be done to possibly improve your standing.


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  • taliah

    I thought that getting your fico is considered a hard inquiry. Therefore it should lower scores.

    • http://www.Credit.com/ Gerri Detweiler

      Requesting your own scores is a soft inquiry that doesn’t affect your scores. Is that what you are asking?


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