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FICO Score


If you’ve applied for a credit card, auto loan, mortgage or some other form of credit, odds are you’ve heard the phrase “FICO score.”

When you apply for credit, potential creditors may want to gauge how likely you are to pay your bills on time. Many creditors use FICO® credit scores to assess applicants, manage accounts, and determine rates and terms.

A FICO® score is a three-digit number ranging from 300 to 850 (and up to 900 for some industry-specific scores). These scores are largely based on your credit reports (statements generated by the consumer credit reporting bureaus that detail your credit activity and current credit situation) and can help creditors assess how likely you are to repay debt.

FICO® scores are widely used by many types of creditors, including lenders, credit card issuers and insurance providers.

If your scores are high, then you’re likely to get approved with competitive rates and terms and If your scores are low, then you could be denied or approved with less-advantageous terms. Or, in the case of insurance companies, lower scores could lead to higher premiums.

Knowing your scores, therefore, may help you determine the likelihood of your application getting approved and whether the creditor is likely to offer you favorable terms. In some cases, a lender may even have a threshold that your scores must meet or pass to get approved.

FICO® credit scores depend on the information in your consumer credit reports, and different pieces of information may raise or lower your scores. For example, making on-time payments may help your scores, while a late payment could hurt it.

FICO breaks its scoring criteria down into five categories, with a percentage value based on each category’s importance, though the importance may vary for individuals.

  • Payment history (35%): Your history of paying bills is one of the most important factors in determining your scores. Your payment history includes your on-time and late payments on credit accounts, and public records related to non-payments, such as a bankruptcy.
  • Amounts owed (30%): How much you owe on credit accounts, such as installment loans and credit cards, and the portion of your available credit that you’re using (known as your credit utilizationrate) together are worth about a third of your scores.
  • Length of credit history (15%): The age of your accounts — including how long you’ve had your oldest account and your newest account — and the average age of all your accounts are worth about 15% of your scores, along with how long it’s been since you last used specific accounts.
  • Credit mix (10%): This includes the types of accounts you have, such as credit card accounts, mortgage loans and retail loans. It’s not a key factor but it’s still considered in formulating your scores.
  • New credit (10%): New credit inquiries and recently opened accounts can also influence about a tenth of your scores.

Creditors can use FICO® credit scores to evaluate prospective customers and manage existing customers. Understanding what affects your FICO® credit scores could help you build good credit, which in turn may help you get the best rates and terms on a future loan or credit card.