In a Nutshell
Fair Isaac Corporation, or FICO, creates a variety of credit scores for use by lenders, credit card issuers and other creditors. Your FICO® scores — which typically range from 300 to 850 — could affect whether your credit application gets accepted, and the terms and rates you’re offered.If you’ve applied for a credit card, auto loan, mortgage or some other form of credit, odds are you’ve heard the phrase “FICO score.”
When you apply for credit, potential creditors may want to gauge how likely you are to pay your bills on time. Many creditors use FICO® credit scores to assess applicants, manage accounts, and determine rates and terms.
A FICO® score is a three-digit number ranging from 300 to 850 (and up to 900 for some industry-specific scores). These scores are largely based on your credit reports (statements generated by the consumer credit reporting bureaus that detail your credit activity and current credit situation) and can help creditors assess how likely you are to repay debt.
Fair Isaac Corporation, or FICO, introduced the first credit risk score in 1981. The organization’s reputation as one of the primary credit-rating companies in the U.S. has grown since then, reaching different industries with scores geared toward different credit products.
Even though you may hear “FICO score” and think of it as a single credit score, you can actually have several of FICO scores, which can differ by industry. Read on to learn more.
- Why are your FICO scores important?
- Why are there different FICO scores?
- What are the FICO score ranges?
- What affects your FICO scores?
- FAQs about FICO® scores?
Why are your FICO® scores important?
FICO® scores are widely used by many types of creditors, including lenders, credit card issuers and insurance providers to gauge your credit risk — that is, how likely you are to repay the money loaned to you.
The higher your credit scores, the more likely you’ll end up with better rates and terms on your loan. With lower scores, if you’re approved, it may be with worse credit terms than if you had higher scores.
In the case of insurance companies, lower scores could lead to higher premiums.
Knowing your scores may help you determine the likelihood of your application getting approved and whether the creditor is likely to offer you favorable terms. In some cases, a lender may even have a threshold that your scores must meet or pass to get approved.
You can try to check the lender’s website or ask a representative to find out whether there is a threshold to be approved and which scoring model(s) the company uses. But some companies may not share this information.
What’s a good credit score?
The answer depends on the lender or creditor that’s reviewing your scores and their criteria, but it’s important to know what range your credit scores are in. Higher credit scores are better than lower scores, and on the 300 to 850 scale, scores of 670 and above may be considered “good” to “very good” to “excellent” depending on the score.
Why are there different FICO® scores?
There are dozens of different FICO® scores, under two general categories.
- Base FICO® scores (the most widely used type)
- Industry-specific FICO® scores (tailored to certain credit products, such as credit cards or auto loans)
Every so often, FICO also releases new credit score versions that are meant to improve upon the last iteration and create a more predictive and reliable score for lenders.
As a result, there may be multiple editions of each scoring model, but lenders can choose to stick with an older version if they prefer.
FICO also creates three versions of its base FICO® scores to work with data from each of the major consumer credit bureaus: Equifax, Experian and TransUnion. The most recent edition is FICO® Score 9, though lenders may still be using FICO® Score 8 or an earlier version.
Industry-specific scores include the FICO® Bankcard Score and FICO® Auto Score. There are multiple versions and editions of these as well.
You may be able to contact a creditor and ask which credit-scoring model it uses to evaluate applicants. Even if you can’t find out, the good news is that the primary scoring criteria are similar for most FICO® credit scores. Therefore, if one of your FICO® scores is in the “very good” range, then your other FICO® scores may also be in that range.
What are the FICO® score ranges?
As we discussed in the section above, FICO® scores generally fall under the widely-used Base FICO® scores or the more circumstantial industry-specific FICO® scores. The ranges are very similar, but it is worth noting that the industry-specific scores have a slightly larger range.
Base FICO® scores
| Poor | Fair | Good | Very good | Excellent | |
|---|---|---|---|---|---|
| FICO® Score 8 | 300–579 | 580–669 | 670–739 | 740–799 | 800–850 |
The latest FICO® base scoring model is FICO® Score 9. But some lenders still use FICO® Score 8 models, and some conventional mortgage lenders may use even older FICO® scoring models.
The base scores are what you may see when you check your FICO® scores after logging into your credit card account or paying for FICO® scores online.
Industry-specific FICO® scores
The industry-specific scores range from 250 to 900. FICO breaks down its industry-specific credit score ranges based on the FICO® 8 industry-specific scoring model.
| Poor | Fair | Good | Very good | Excellent | |
|---|---|---|---|---|---|
| FICO® 8 industry-specific scores | 250–579 | 580–669 | 670–739 | 740–799 | 800–900 |
FICO creates industry-specific credit-scoring models tailored for certain credit products, including credit cards, auto loans and mortgage loans. These scoring models use the same foundation as the base scoring models. So if you have a good FICO® Score, you may also have a good FICO® Auto Score or FICO® Bankcard Score.
What affects your FICO® scores?
FICO® credit scores depend on the information in your consumer credit reports, and different pieces of information may raise or lower your scores. For example, making on-time payments may help your scores, while a late payment could hurt it.
FICO breaks its scoring criteria down into five categories, with a percentage value based on each category’s importance, though the importance may vary for individuals.
Image: ccupdateutilization-fico-2- Payment history (35%): Your history of paying bills is one of the most important factors in determining your scores. Your payment history includes your on-time and late payments on credit accounts, and public records related to non-payments, such as a bankruptcy.
- Amounts owed (30%): How much you owe on credit accounts, such as installment loans and credit cards, and the portion of your available credit that you’re using (known as your credit utilization rate) together are worth about a third of your scores.
- Length of credit history (15%): The age of your accounts — including how long you’ve had your oldest account and your newest account — and the average age of all your accounts are worth about 15% of your scores, along with how long it’s been since you last used specific accounts.
- Credit mix (10%): This includes the types of accounts you have, such as credit card accounts, mortgage loans and retail loans. It’s not a key factor but it’s still considered in formulating your scores.
- New credit (10%): New credit inquiries and recently opened accounts can also influence about a tenth of your scores.
While the exact percentage values differ depending on your overall credit file and the scoring model, understanding the relative importance of credit-scoring factors and what you can do to build good credit may help you improve your credit scores.
FAQs about FICO® scores?
Any time you request your FICO® score, a new score is pulled for you. But given that lenders generally only send updates to the credit bureaus every 30 days you should expect to see the new information reported about once a month.
The VantageScore® model, which is what Credit Karma uses, was rolled out by the three major credit bureaus (TransUnion, Experian, and Equifax) in 2006. Their goal was to create a more predictive scoring model that is easier to understand, and you can learn more of the specific differences between the two scoring models here.
There are many places that will let you get your FICO® score for free, including the Discover Credit Scorecard (available even if you aren’t a Discover customer), certain credit cards like American Express® and Citibank®, and even possibly your local credit union.
What’s next
Creditors can use FICO® credit scores to evaluate prospective customers and manage existing customers. Understanding what affects your FICO® credit scores could help you build good credit, which in turn may help you get the best rates and terms on a future loan or credit card.