What is a FICO® score?

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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.

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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-scoring companies in the U.S. has grown since then, now reaching different industries with scores geared toward different credit products.

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Is FICO the only type of credit score?

FICO isn’t the only method for creating credit scores. An alternative scoring model is VantageScore, which is used for the TransUnion® and Equifax® scores that Credit Karma offers. Lenders may also create their own proprietary internal credit scores to use in combination with third-party scores.

Because there are different scoring models, you may see your scores differ slightly between credit bureaus. Your scores using the VantageScore scoring model might be slightly different from your FICO® scores, for example. This is perfectly normal — while credit-scoring models look at similar factors when calculating your scores, they may weigh some factors differently or release updated scores at different times.

“Despite widespread use of the term ‘FICO score’ as a single score, FICO is actually the brand, with dozens of scores falling underneath that brand,” says John Ulzheimer, a credit expert who worked at FICO and Equifax. More on this later.

Why credit scores differ between credit reporting agencies

Why are your FICO® scores important?

FICO® scores are widely used by many types of creditors, including lenders, credit card issuers and insurance providers.

“If your scores are high, then you’re likely to get approved with competitive rates and terms,” says Ulzheimer. “If your scores are low, then you could be denied or approved with less-advantageous terms.”

Or, in the case of insurance companies, lower scores could lead to higher premiums.

Knowing your scores, therefore, 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. However, some companies may not share this information.

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)

Ulzheimer compares FICO® scores to computer software: “[They] are redeveloped from time to time, yielding a new generation of FICO® scores.”

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.

For example, FICO creates three versions of its base FICO® scores to work with data from each of the major consumer credit bureaus: Equifax, TransUnion and Experian. The most recently released edition is FICO® Score 9, though some 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 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.

  • 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.


Bottom line

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.