What Does FICO Score Mean?
The term “FICO score” refers to a type of credit score, which is created by the Fair Isaac Corporation, or FICO. FICO pulls credit information from TransUnion, Experian, and Equifax, which are the three main consumer credit reporting agencies.
Lenders and other companies can use a FICO credit check to predict the risk of lending to a particular consumer—or of entering into other agreements with him or her.
Although there are other companies that create credit scores, FICO is currently the company used most often.
Why Do I Need a Good Credit Score?
Many lenders rely heavily on FICO scores to make lending decisions. Even if you can explain your creditworthiness to them, companies usually trust your FICO score as the final word. Some companies won’t lend to you if your FICO score is below a certain minimum.
If you can raise your FICO score, then it can help you get a mortgage, get better interest rates on various types of loans, and receive other benefits.
How Is a FICO Score Calculated?
A typical consumer FICO score is based on five factors. Below is the importance of each factor to the score, expressed as a percentage:
- 35%: Your history of paying your debt and other bill payments on time
- 30%: Your total debt owed, broken into individual accounts
- 15%: How old your credit history is
- 10%: The number of new credit inquiries being sent to the credit reporting agencies about you
- 10%: The mixture of types of credit you carry
There are other FICO score formulas for certain types of credit, such as auto loans. And there are other companies besides FICO that calculate credit scores differently. But if you improve your weakest areas on the list above, your creditworthiness in general should increase.
What Is a Good Credit Score?
The standard range of FICO scores for consumers goes from 300 to 850, with 850 being the best score. If you have a rate of about 760 or higher, you should get the best interest rates and terms that lenders offer.
To achieve a higher score, you would need to diversify your mixture of debt types, always pay your bills on time, and keep your credit card balances low. You would also need to minimize the number of FICO credit checks that lenders send concerning you.
How Can I Get a Loan with a Low FICO Score?
Lift Credit offers installment loans to customers with any credit score—without even running a FICO credit check! Visit LiftCredit.com to start the process of getting the money you need quickly.