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FICO Credit Score
Are you a 780? An 810? A 423 (eek!)?
In today’s world people have become increasingly dependant on credit and most have no idea what their
credit report score is. Until recently, you would have had no way to answer the ever-elusive question (and painfully unpopular pick-up line):
What does FICO stand for?
Not Fido - FICO!
FICO stands for Fair Isaac Corporation. They are the ones who created the formula which defines your credit-worthiness.
Your FICO score used to be a highly classified number known only to lending professionals. But in March of 2001, credit bureaus lifted the veil of credit scoring and made your credit score rating readily available.
Now with just a few clicks, you can see those three magic digits. In FICOland, your number can range from the lowest score of 300 (extremely high risk) to the highest credit score of 850 (extremely low risk, a perfect credit score). 720 is considered an average credit score.
So what’s the big deal?
Well, actually it IS a big deal. The lending industry uses your credit score numbers for a quick, impartial assessment of consumer credit risk to determine the likelihood of you paying back the money you borrowed. Sometimes this single measure can determine your fate in important matters like:
If you have a good credit score, you’ll pay less interest and your request will be more likely to get approved. According to Fair Isaac, the FICO score is used in 75% of residential mortgage applications. If you want to get the best interest rates, you should have a good credit score over 720.
There are three major credit bureaus in the US: Experian (888-397-3742), TransUnion (800-680-7289), and Equifax (800-525-6285), each with an individual evaluation system, based on different factors. When you borrow money your lender sends information to a credit bureau which details, in the form of a credit report, how well you handled your debt. From the information in the credit report, the bureau determines a credit score. And as the information changes, your scores can change, too.
Credit Score Range
What’s In Your FICO Credit Score?
FICO scores are calculated from a lot of different credit data found in your credit report. Your credit report is a comprehensive rundown of your borrowing habits provided by the three major credit bureaus. The information in each is used to calculate an individual’s credit score. The primary factors include:
Even though all these factors are included in credit score calculations, they are not given equal weighting. The percentages in this chart reflect how important each of the categories is in determining your score.
Evidently, your credit rating is most affected by your historical tendency for paying off your debt. The biggest factor that can give you a good FICO score is having a history of paying off your debts fairly quickly. Additionally, maintaining low levels of indebtedness (not running up large balances on your credit cards), having a long credit history, and refraining from constantly applying for additional credit cards will all help your score.
Credit Score Calculator
Because the scoring systems are based on different criteria which are weighted differently, the three major credit bureaus may issue differing scores for an individual, even though the scores are based on the same information.
Although we would love to explain the exact formula to calculate credit score, due to the proprietary nature of the FICO score, the Fair Isaac Corporation does not reveal the exact formula.
What’s Not in Your Credit Score?
FICO scores take into account a wide range of information on your credit report. However, they do not consider:
Who Is Allowed to See Your Credit Report?
Credit bureaus can only provide information to the following requestors:
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