FICO stands for Fair Isaac Corporation (which was founded in 1956 by Bill Fair & Earl Isaac and first head quartered in San Rafael, CA). A FICO score is a three digit number between 300 and 850 given to individuals which aims to give a snapshot of an individuals credit risk, it’s area of use is mostly in the USA but it’s also very occasionally used in Canada and other regions. The score is calculated by using statistical analysis of an individuals credit files.
Because there are three credit bureaus (Experian, Equifax and TransUnion) and data can vary between bureaus each person actually has three FICO scores, they are almost always within a small range.
- Other names for FICO scores
- What’s The Make Up Of A FICO Score
- What’s Not Included In Your FICO Score
- FICO Score Range
- FICO Score Chart
- Where To Get Your FICO Scores
- FAQ’s About FICO
- Free FICO Score
Other Names For FICO Scores
Each of the three credit reporting agencies have a different name for their FICO scores. Despite the different names they use the same methods/statistical analysis as Fair Isaac, they do have different score ranges though. The different names and score ranges are as below:
|Credit Reporting Agency||FICO Score Name||Score Range|
|Experian||Experian/Fair Isaac Risk Model||330-830|
What’s The Make Up Of A FICO Score?
The exact formula used to calculate FICO scores is keep a secret, FICO has released some vague data which is outlined before to give you a better idea of how FICO scores are calculated.
- 35%: Payment History – Late payments on bills (utilities, mortgage, credit card and car financing loans) can cause FICO scores to drop. Paying your bills on time will improve your FICO score over time.
- 30% Credit Utilization Ratio – Current utilization debt/Total amount of utilization credit available. This is a ratio of your current revolving debt (mostly credit card balances) to the total available amount of revolving credit. You can improve your credit utilization ratio by either paying down your debt OR increasing your credit limit. In simple terms the credit utilization ratio is the amount you currently owe in credit card debt divided by your credit card limit. The higher your credit utilization ratio, the lower your FICO. It’s important to note that there is quite a lot of anecdotal evidence to suggest that having a credit utilization ratio of zero (not carrying a credit card balance) will not improve your FICO score – while having a ratio of 0.1 – 0.3 (carrying a balance of 10%-30%) will.
- 15%: Credit History Length – As your credit history ages, your FICO will slowly improve.
- 10% Recent Searches For Credit – A credit inquiry occurs whenever you seek for and apply for a new line of credit (e.g applying for a new credit card or home loan) – this information is added to your credit report and is used by FICO in calculating your score. The outcome (wether you were accepted or denied for a new line of credit) of your application is not added to your report. Another form of credit inquiry is when either yourself or your employer (usually for employee verification) checks your credit report. While these types requests for data are added to your credit report, they are not used in calculating your FICO score.
- 10% Other Factors – There are a number of other factors which can affect your credit score – the most common and influential is Credit Types Used – There are four types of credit; installment, revolving, consumer finance and mortgage. Your score can be improved by having a history of successfully managing different credit types. Other’s include: money owed by a court judgement, tax lien and opening multiple consumer finance accounts (store specific charge cards).
These factors can both negatively and positively affect your score, for example having a high credit utilization ratio will hurt your score – while lowering it will improve it over time.
What’s Not Included In Your FICO Score?
- Salary, Occupation, Employer, Employment History And Length Of Employment – This information is not used to calculate your score, although it’s almost always asked for when applying for credit.
- Location – where you live is not included in your FICO score. This is not to say that lenders do not take this account – simply that they get this information from elsewhere (usually you are required to give this when applying for credit).
- Age – Your age is not taken into consideration for your FICO score directly, but the age of your credit history is.
- Race, color, religion, national origin, sex, sexual orientation and marital status. – Under the Consumer Credit Protection Act US law does not allow any credit scores to take any of these into account.
- Anything not found on your credit report. Have a look closely at your credit report (see: How to get a free credit report) – anything which is not included in these reports cannot be used in your FICO score as FICO uses the data found in these reports.
- Credit Counselling/Debt Management – If you’re working with a credit counselling/debt management company this is not included in your score.
- Other Rates Of Interest – The interest rates you are paying on other credit lines is not used in your FICO score – although if you have another line of credit with the same bank/credit agency then they will be able to access and use this information.
- Child/Family Support – Any child or family support issues you’ve had (including non payment – unless a court judgement has been made against you) will not show up in your credit report or FICO score.
While there is a lot of information not contained in your FICO score for privacy and anti-discrimination it’s important to realize that when apply for credit, lenders almost always ask you for some or all of this information and use it to either accept or deny you.
FICO Score Range:
- Minimum score is 300
- Maximum score 850
- The median score is 723 (meaning half of the people have scores above 723 and half below)
- Follows a left skewed distribution (~60% of scores are between 650 & 799)
- Mean score of 693
|Score||Percentage Of Population||Delinquency Rate|
|800 or higher||11||1%|
The above FICO score chart shows the FICO score along with the percentage of population in that score bracket, alongside that score brackets delinquency rate. As you can see there is a strong correlation between a persons score and the chance that they will become delinquent.
Free FICO Score
Knowing what your FICO score is, is extremely important. The easiest and cheapest way to get your FICO score is to follow our free FICO score guide or use one of the suggestions found below.
|Company Name||Overall Rating||Real FICO Score||Free Trial Length||Number Of FICO Scores|
Free 7 day trial
|All Three||Visit Site|
Free 7 day trial
|All Three||Visit Site|
Free 7 day trial
|Experian FICO Score Only||Visit Site|
FAQ’s About FICO:
Will a lower FICO score hurt my chances of obtaining a home loan (or any other type of credit, e.g credit card or car financing)?
The short answer is yes. Almost all lenders use your FICO score as a way of measuring their risk. This does not mean that it’s impossible to get credit with a low FICO score – only that it will make it more difficult to do so.
I am a minority, I think I am being unfairly targeted by FICO and thus my score is low, is this true?
The Consumer Credit Protection ACT USA prevents any details of your sex, religion, race, color, national origin and martitial status from appearing on your credit report. FICO accesses all it’s data from these credit reports and thus it’s impossible to take any of these factors into account.
Will my score drop when I apply for new credit?
In most cases applying for new credit (whether it be credit cards or a mortgage) will not cause your score to drop significantly. What does cause your score to drop significantly is when you apply for multiple lines of credit in a short amount of time. If you get rejected from one lender it’s suggested that you wait some time before applying to another lender otherwise it’s likely to affect your FICO score and hurt your chances of getting any more credit.
What is considered a good FICO score?
It really depends on what type of credit you are applying for and the rate of interest of that credit. In most circumstances anything above a score of 700 is considered ‘good’ while anything below a 600 is considered ‘bad’. We’ve included the table below to give you slightly more detail.
FICO Score Grade Typical Mortgage Rates* 720-850 Excellent A 700-719 Very Good A + 0.13% 675-699 Good A + 0.65% 620-674 Fair A + 1.80% 560-619 Bad A + 4.30% 500-619 Very Bad A + 5%
*These mortgage rates are a guide only, please contact your local mortgage broker or bank to get a better idea of what mortgage rate you will be eligible for. A is simply a variable rate meant to give you a rough idea of what premium you will pay if you have a poor FICO score.
I have a really bad FICO score, what can I do to improve it?
There are a few simple things you can to improve your credit. Firstly go through your credit report. Each person is entitled to one free report per year (see: Guide to getting a free credit report) – sometimes people have things on their credit report that they are not responsible for. This can be caused by misinformation or fraudulent activity. Either way it’s important to get this straighten out before any damage is done.
Set up direct deposit for all of your bills – this will ensure that they get paid on time. Most utility companies also offer some type of discount for paying on time/using direct deposit.
Pay down any existing debt you have. If you already owe 100% of your credit limit then you’re unlikely to be approved for more credit as your credit utilization will be 1. A credit utilization ratio of 0.1-0.3 has anecdotally been shown to improve credit scores.
Open different types of credit. Most people use revolving credit (most commonly seen in credit cards) – if you can add another type of credit such as installment (car financing for example) then this can marginally help your score. It’s important to note that this accounts for ~10% of your FICO score and in our opinion isn’t something you should go out of your way to implement.
Don’t panic. One of the worst things you can do for your score is panic and try to apply for lots of different credit at the same time or within a short period of time. Being patient will also improve your FICO score as the age of your credit history also has a positive effect on it. Read more about How To Improve Your Credit Rating.
Knowing your score is half the battle, unfortunately the credit bureaus make it very hard and costly to get your FICO score. Thankfully other companies have popped up that now offer this same information for free. Read our guide to get your free FICO score and once you’ve got it read our guide on How To Improve Your Credit Rating. Thanks for reading, if you have any other questions don’t hesitate to contact us.