What exactly is FICO Score?
FICO score is just another way of saying your credit rating. We hear terms like “credit rating” and “credit score” and for many, those terms are subjective. FICO score is a rating/scoring system that actually quantifies your credit score and turns it into a number. FICO is short form for this numeric rating system developed by the Fair Isaac Company back in the early 1980′s. This numeric score has become the standardized was the 3 main credit agencies calculate your credit worthiness. Equifax, TransUnion and Experian all have separate files on you, and collect information on your credit history. And all three give you a FICO score.
What Is The FICO Score Range?
Based on your credit details and history you FICO score will range between 300 and 850.
At 300 you’ll have a very hard time getting any creditor to grant your credit. And at 850 you’ll be swarmed with offers from every lender and credit card company.
Your FICO score is not a credit report. A credit report is a detailed list of all your financial transactions. This information, along with a few other things is used to calculate your FICO score.
Your credit report will contain the following
- any credit account you currently have open
- a report of your monthly payments
- how many times you’ve applied for credit, and from who
- what you’ve applied for credit for
- if you’ve declared bankruptcy
Your credit report is just a detailed, ever updating list. You won’t see your FICO score when you look at your credit report.
The credit bureaus use more than just your credit report to calculate your FICO score. Of course, how you pay your bills is important. But they also look at how much credit you’re using, the percentage of credit granted to credit used, total debt load as a percentage, how long you’ve had a credit file, etc.,
The majority of your FICO score is calculated by your payment history and the total debt you currently have. If you want to improve your credit score these are two things you can easily work on.
Pay down your debt, and make sure you make your payments on time. The best thing about hitting a bump in the road is that your score is a dynamic number. It changes constantly, and you can start to improve your FICO score quite easily. Especially now that you know what it is, and how it’s calculated. You’ll end up saving money if you keep an eye on your FICO score!