What’s A FICO Credit Score?

You have probably heard the word “FICO” before in your financial dealings. Do you know exactly what FICO stands for? FICO stands for the Fair Isaac Corporation. These people who retrieve information from your credit report to calculate the three digit number which is your FICO score have been at this task since the late 1950s.

They have special software which uses special math tables that manipulate the numbers found on your credit report to figure out your score, and they do this for all three of the credit reporting agencies. Each agency can have different credit information on you, which is why the scores from the different agencies can be different.

Here is the formula used by the Fair Isaac Corporation in figuring your credit score. Your payment history is 35% of the score.  Paying your accounts on time will get you a high score. Paying late or not at all, as in bankruptcy, will make your FICO score low.

The amount of money you owe is 30 percent of your credit score. They look not only at how much your owe on your credit accounts, but how many of your accounts actually have balances, and how much of any available credit you might have is being used.

The length of time you have had a credit history is 15% of your score. The longer you have had credit, the better your score will be. Note that it is still possible to have a high score even with a short credit history. It’s all about how your credit history looks to FICO’s computers.

If you have recently gotten any new credit accounts, they add 10% of your score, and the type accounts these are makes up 10%. Too many credit applications that are too close together – any more than around 30 days - can lower your credit score.

FICO likes to see a wide variety of different types of accounts. This makes up 10% of your score.  Credit cards, a home loan, and personal loans can all add to your score.

All of this information is used together to determine your credit score. No one thing has more bearing on the score than another, but the different “sets” of information can mean more to one person’s score than to another person’s, simply because of differences in their credit histories. A low FICO score might get you credit, but you will pay thousands more in interest fees than someone with a good FICO score would.

Unlike your credit record, you usually have to pay a small fee to get your credit score. You must also prove your identity in order to get your score to prevent identity theft. You can get your credit score online, on the Internet, via telephone, or in the mail.

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