What Is a FICO Score and Why Does It Matter?
Written by
Kathy Evans
Edited by
Emily Gadd
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A FICO score is a three-digit number that helps lenders assess a borrower’s credit risk. Created by the Fair Isaac Corporation in 1989, this score is used by over 90% of U.S. lenders to determine creditworthiness. A higher FICO score can improve your chances of getting approved for loans and credit cards, as well as securing lower interest rates.
What Is a Good FICO Score?
The higher your FICO score, the more attractive you are to lending institutions. The lower your score, the more lenders consider you a credit risk.
Base FICO credit scores range from 300 to 850 . Although a FICO score of 670 is considered the beginning of good credit, a score of 700 or higher will open up more loan options and lower interest rates.
Here’s a breakdown of base FICO scores and how they are categorized from poor to exceptional.
| Category | Range |
|---|---|
| Exceptional | 800-850 |
| Very Good | 740-799 |
| Good | 670-739 |
| Fair | 580-669 |
| Poor | 300-579 |
Keep in mind that this is just one model. FICO credit score ranges may differ depending on the bureau or agency reporting. Other bureaus may use the word “excellent” instead of “exceptional” to categorize the highest range of FICO scoring.
A borrower’s final FICO score is calculated by collecting and evaluating data from the borrower’s various credit accounts.
What Factors Affect Your FICO Credit Score?
In the FICO scoring model, credit scores are calculated by assessing five factors generated from your credit report:
- New credit: 10%
- Credit mix: 10%
- Length of credit history: 15%
- Amounts owed: 30%
- Payment history: 35%
A FICO score considers all of these five factors and includes both positive and negative information from your credit report.
How To Find Your FICO Score
You shouldn’t have to pay a membership fee to check your FICO score. Here’s where to look:
- Choose the free subscription plan from FICO
- Check to see if your bank or credit union is partnered with FICO and provides free scores
- Check with your credit card issuer to see if it offers free FICO scores
- Sign up for a credit score service, but be aware that you may be charged a monthly subscription fee
Additionally, be aware that your FICO score might be different from credit scores shown on certain apps. For example, Credit Karma gives users credit scores from VantageScore instead of FICO.
FICO Score vs. Credit Score — Are They The Same?
No. FICO is only one of many credit-scoring models that lenders use to evaluate a credit applicant. However, the FICO credit score is the most widely used. Your credit score can differ depending on the credit score provider and the credit-scoring model it uses.
How To Improve Your FICO Score
If your FICO credit score is lower than 670, you may want to find some ways to boost your score. Besides checking your credit report for errors and disputing any that you find, here are a few other things you can try.
Avoid Closing Credit Card Accounts
When you close a credit card account, you have less available credit, which increases your credit utilization. When possible, leave credit cards open.
Pay Your Bills on Time
Making on-time payments will improve your FICO credit score. Even one late payment can cause your score to drop.
You can set up automatic bill payments to avoid making late payments and their associated fees.
Reduce Your Credit Utilization Ratio
It’s important to keep credit card balances low — under 30% of your limit. To do that you can:
- Keep your credit card balance low
- Request a credit limit increase from your credit card company
- Use your credit cards less to reduce your spending
- Avoid closing your credit cards
- Consider opening a new credit line if it makes sense
Good To Know
Your FICO score could change for various reasons. As new information is added to your credit report, it’s common for your score to fluctuate throughout any given month.
Some specific events that could cause your FICO score to change include making a late payment, paying down a credit card balance and paying off a loan.
FICO Score FAQ
Here are the answers to some commonly asked questions about FICO scores.- What if I don't have a FICO credit score?
- To have a FICO score, you need at minimum:
- A credit account that has been active within the last six months
- A credit account that is at least six months old
- To have a FICO score, you need at minimum:
- What is a good FICO score for a car loan?
- To get the best rates on a car loan, you should have a FICO score of at least 720.
- How is a FICO score different from a regular credit score?
- FICO is just one of the many credit-scoring models that are available and your credit score can differ depending on the model used. However, a FICO credit score is the one that is most widely used by lenders.
- How often should I check my FICO score?
- At a minimum, you should check your FICO score annually. However, if you're planning to apply for credit or a loan or you're trying to improve your credit, you'll want to check it more frequently to keep tabs on how your credit is doing.
- What is a FICO score and why does it matter?
- It's not easy to avoid credit in the U.S., and credit scores seem to affect nearly every area of our lives.
- If you have a bad credit score, it can be difficult to obtain necessities, such as getting an affordable mortgage loan, getting a good job or renting an apartment.
- Having a good, very good or exceptional credit score can make a big difference even after you qualify for a loan, because your interest rates will most likely be lower than if your FICO score is in the poor to fair range.
Cynthia Measom contributed to the reporting for this article.
