What Is a FICO Credit Score?

Your FICO score is a number that lenders use to judge your creditworthiness.

Your FICO score gives lenders a snapshot of your credit profile as a three-digit number. They can use it to predict how likely you are to repay debts, which helps them approve or deny credit applications and set terms. The number is based on data in your credit report from one of the three major national credit bureaus: Experian, Equifax or TransUnion.

Knowing what your FICO score is and how to improve it is critical if you plan to borrow money

What Is a FICO Score?

FICO, short for Fair Isaac Corp., was founded in 1956 and introduced the FICO score in 1989. Fast-forward to today: FICO has 10 versions of its base model score, plus industry-specific scores for certain types of credit.

With each new scoring model, FICO has changed its algorithm to provide lenders with another way to predict risk for each borrower.

Your FICO score can range from 300 to 850, with 740 or higher considered very good or exceptional credit, and 579 or lower considered poor credit. Here’s how FICO breaks down credit score ranges:

Know that some lenders may differ from these FICO ranges.

How Is a FICO Score Calculated?

FICO isn’t your only credit score, but lenders widely use it, which means you should know your score and how it’s determined. Your FICO score is based on your credit data, including five distinct factors.

Each factor has a different weight. Here’s how these factors break down:

  • Payment history accounts for 35% of your FICO score.
  • Amounts owed make up 30%.
  • Length of your credit history represents 15%.
  • Credit mix is 10%.
  • New credit is 10%.

Still, these are not hard-and-fast rules. “That percentage can vary depending on the very specific information contained in an individual’s credit bureau file,” says Can Arkali, senior director in analytics and scores development at FICO.

If you’ve never missed a payment, for example, other factors may become more important. In that case, amounts owed or available credit will play a bigger role, Arkali says.

And when you have no FICO score, how long does it take to get one? You need at least one active credit account for at least six months that reports to the major credit bureaus.

Why Does Your FICO Score Matter?

When you apply for credit cards, loans or other financial products, your FICO score will likely come into play. Lenders often use your FICO score as well as other factors to determine whether to approve your application for credit and to set your interest rate.

A good FICO credit score can save you money. The difference in interest rate on a major loan, such as a mortgage, can add up to thousands of dollars paid over time.

How much can you save with a good FICO credit score? Use the FICO Loan Savings Calculator to see how your FICO score can make a difference in what you’ll pay for a mortgage or car loan.

Do You Have More Than One FICO Score?

When you check your FICO score, you’re typically looking at a base model FICO score, which is calculated using the five factors in your credit report.

But if you’re applying for a credit card, an auto loan or a mortgage, the lender may choose to pull an industry-specific FICO score to determine your creditworthiness. “The industry-specific models are very much focused on the consumer behavior on that particular product type,” Arkali says.

Industry-specific FICO models include:

  • FICO auto score. This credit score, which taps the FICO base model, ranges from 250 to 900 and gives more weight to your experience with auto loans and leases.
  • FICO bankcard score. As with the FICO auto score, this one also has a wider range of 250 to 900. As you might expect, it focuses more on your experience with credit cards than with other types of credit.
  • FICO mortgage score. Mortgage lenders opt to use previous versions of the base model FICO score.

Is a FICO Score the Same as a Credit Score?

Your FICO score is one credit score, but it is not the only credit scoring model that may be used to assess your creditworthiness. Each of the three credit bureaus, for instance, has its own proprietary credit score.

The most popular non-FICO credit score is the VantageScore. The VantageScore model was developed by the three major credit bureaus, which introduced it in 2006. Many credit monitoring services offer free access to your VantageScore instead of your FICO score.

FICO and VantageScore weigh many of the same factors in their scoring models, which means both credit scores are usually in the same range.

How Can You Get Your Free FICO Score?

Following a change during the COVID-19 pandemic, you can now get a free copy of your credit report each week at AnnualCreditReport.com. Also, many major credit card issuers offer free FICO score access to cardholders as a benefit.

FICO and the credit bureaus provide credit monitoring services that include access to your FICO score for a one-time or monthly fee.

If you don’t have a credit card or your card issuer doesn’t give you FICO score access, another option is Discover Credit Scorecard. This tool, available to all consumers, provides your FICO score and a breakdown of what’s affecting it. There are also other sources of free credit scores, though they may not be FICO scores.

How Can You Improve Your FICO Score?

If your FICO score isn’t quite where you want it to be, taking a critical look at your credit report can help you figure out how to improve it. By developing good credit habits, you can solve the core issues that affect your credit score and avoid repeating them.

For starters, get a copy of your credit report from each of the major bureaus at AnnualCreditReport.com. Read through your credit reports to find out what may be bringing down your score.

What to look for: errors, late payments or collection accounts, and credit cards with high utilization. If there’s nothing wrong and you’re fairly new to credit, you may just need to be patient.

If you notice an error, address it as quickly as possible to get your FICO score back on track. Here are some other best practices to follow regardless of what you find on your credit reports:

  • Pay your debts on time, every time. Payment history is the most influential factor in your FICO score. Get caught up on past-due payments, and set up automatic payments to avoid missing future ones. “Circumstances can cause you to fall behind on certain payments,” Arkali says. “But it’s very important to make sure that one or two missed payments don’t start affecting your other credit obligations.”
  • Keep your credit card balances low. Some experts advise keeping your credit utilization below 30%, but even lower is better. Keep your utilization low by limiting credit card use or by making multiple payments each month. If your utilization is high one month, don’t worry too much. Once you pay it down and the card issuer reports the lower balance, your score should bounce back.
  • Avoid unnecessary borrowing. The more you apply for credit, the bigger the impact on your FICO score. Try to minimize borrowing and avoid applying for several credit accounts in a short period.
  • Monitor your credit regularly. You can check your credit reports for free once a week and keep an eye on your information, or even pay for a credit monitoring service year-round.

As you follow these tips and address other problems on your credit reports, you should see positive changes in your credit score over time. Results won’t happen overnight, but healthier credit habits can help you earn a better FICO score and more affordable borrowing options.