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What is a FICO Score?
By Victor Rosario MONEY RESEARCH COLLECTIVE
A credit score is a three digit number that lets lenders know your creditworthiness without having to look at your credit report. Credit scores take into account reports from the three major credit monitoring agencies (Experian, Equifax and TransUnion) to assess your credit risk.
Along with VantageScore, FICO (an acronym for Fair Isaac Corporation) is among the credit scoring models most used by those agencies. Good FICO scores – which depend on a number of factors, including the length of credit history, credit utilization rates and having a good payment history – will increase your chances of success when you apply for credit.
Table of contents
- What is a FICO score?
- How do FICO scores work?
- FICO score FAQs
- Summary of our guide to what is a FICO score
What is a FICO score?
FICO was founded in 1956 and started selling its first credit scoring system two years later. The base FICO score has been the company’s flagship product since its inception in 1989. Base FICO scores range between 300 to 850, while the company’s other, industry-specific scores can range from 250 to 900.
Types of FICO scores
In addition to its main offering, FICO also provides industry-specific credit scores to assess risk in such industries such as credit card decisioning, lines of credit, mortgage lending and auto lending.
FICO updates its scoring systems periodically; scores are numbered, with the highest number being the latest version. As of August 2022, the newest score version is FICO Score 10, while the version that’s most frequently used is FICO Score 9.
Your FICO report shows all relevant scores for you. Borrowers who expect to have credit inquiries from a particular industry can focus most on the score that’s most important to that marketplace – and on the version of the score the main credit bureaus use.
For example, while Experian uses FICO Score 2 in mortgage lending checks, Equifax uses FICO score 5 and TransUnion uses FICO Score 4 for that same category. Here’s a breakdown of the scores used by each credit bureau in different categories, as listed in myFICO:
| Experian | Equifax | TransUnion | |
|---|---|---|---|
| Most used overall | FICO Score 9 FICO Score 8 | FICO Score 9 FICO Score 8 | FICO Score 9 FICO Score 8 |
| Auto lending | FICO Auto Score 9 FICO Auto Score 8 FICO Auto Score 2 | FICO Auto Score 9 FICO Auto Score 8 FICO Auto Score 5 | FICO Auto Score 9 FICO Auto Score 8 FICO Auto Score 4 |
| Credit card decisioning | FICO Bankcard Score 9 FICO Bankcard Score 8 FICO Score 3 FICO Bankcard Score 2 | FICO Bankcard Score 9 FICO Bankcard Score 8 FICO Bankcard Score 5 | FICO Bankcard Score 9 FICO Bankcard Score 8 FICO Bankcard Score 4 |
| Mortgage lending | FICO Score 2 | FICO Score 5 | FICO Score 4 |
| Newest version | FICO Score 10 FICO Auto Score 10 FICO Bankcard Score FICO Score 10T | FICO Score 10 FICO Auto Score 10 FICO Bankcard Score FICO Score 10T | FICO Score 10 FICO Auto Score 10 FICO Bankcard Score FICO Score 10T |
How do FICO scores work?
What are the factors that affect your credit score?
While FICO scores reflect a person’s entire credit record, certain components of that data are given more weight than others. Payment history is given the most importance, with 35% of your FICO score depending on it. This is followed by the amount you owe (30%) and the length of your credit history (15%). The total types of credit you use and new credit utilized each receive a weighting of 10%.
While other factors —such as available credit— are important, you would do well to focus on these main credit components if you are looking to increase your credit score.
How long does it take to get a FICO score?
While every case differs, you can expect to wait at least six months for your credit history to be reflected in your credit score. During this period, avoiding missteps such as making payments late or allowing errors to linger in your credit file will help you to build a good FICO score. These are among the steps to take in order to build credit quickly.
FICO score FAQs
What is a good FICO score to have?
Although it varies depending on the version of FICO score, FICO scores considered "good" generally start at 670, with a higher score always being better.
What does a bad FICO score mean?
Low FICO scores usually convey to lenders that lending to you is financially risky. You likely will not be able to get the credit you have requested. If that's the case, consider taking the steps necessary to repair bad credit, which potentially could raise your score.
What is the importance of a FICO score?
Maintaining a good credit score is key to many personal finance endeavors, including getting a home mortgage or auto loan. Since FICO scores are used by the majority of financial institutions to determine the amount of credit you're able to access, it's in your best interest to build a high score and periodically check your credit score to ensure that no errors have appeared on your credit report.
How do you get a FICO score?
According to FICO, receiving a score requires that you have a bank account that has been open for at least six months, and has been reported to a credit bureau. You must also ensure your credit report has no false indications that you are deceased, an occasional error that understandably complicates receiving credit.
Summary of What is a FICO Score
When making lending decisions or deciding interest rates, credit card issuers and financial institutions in general use credit scores to determine risk. Maintaining good credit or aiming to fix your credit is an important part of reaching financial stability. And with FICO being the main credit scoring system in the country, regularly checking and maintaining a good FICO score is paramount to your personal financial success.
