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Your FICO Score Explained

What you'll learn: What a FICO Score is


Whether you’re buying a home, getting a car loan, or looking for a new credit card, your FICO Score — or, more generally, your credit score — is key to getting approved for credit. But just what does this term mean, how can you find out what yours is, and what can you do to improve it? Contrary to popular belief, your FICO score isn’t complicated. We’ll break down this financial terminology for you so you can gain better control of your finances.

Though sometimes generally referred to as a credit score, your FICO score is a numerical value, between 300 and 850, that represents how much financial risk you pose to a business. A lower number means there’s more risk of the business not getting repaid, but a higher number means that you’re likely to repay — which means businesses may be more likely to extend you credit or offer you their best rates. Most credit scores fall between 600 and 750, with scores higher than that getting the best possible credit offerings, while scores under 600 are more likely to have difficulty getting credit on good terms.

However, your FICO score is not a lending decision: it’s just a number businesses or financial institutions can use when they’re deciding whether or not to extend you credit. It’s not just a magic number, either: your FICO score is based on the information found in your credit report. FICO is simply a system for taking that information and giving it a numeric value which your financial institution probably uses, at least in part, to decide whether to lend you money or extend you credit. Though there are a number of different scoring systems that can be used to come up with a credit score, FICO is the most common and, fortunately, how it determines your score is based on a fairly simple formula:

  • Payment history makes up 35% of your score
  • Amounts owed makes up 30% of your score
  • Length of credit history makes up 15% of your score
  • New credit makes up 10% of your score
  • Types of credit used makes up 10% of your score

While this is the average way a FICO score is calculated, it can vary depending on both the person in question — which means a person with limited credit history may find the importance of each item weighted differently. Additionally, Fair Isaac, which invented the FICO scoring system, has several variations on it which may be used by different lenders… and sometimes lenders use alternate systems to determine your credit score. However, the above information makes for a good rule of thumb: if you pay your bills on time and don’t run up large debts, your credit score should be in good shape.

What’s My FICO Score?

Unlike your credit report, which you can get for free from each of the three credit reporting bureau every year, finding out your credit score will probably have a fee attached. Check with your financial institution or credit card company first to see if they offer free access to your score.

The number you find can help you decide if you’re likely to qualify for a loan or give you a baseline as you attempt to clean up your credit — but you shouldn’t take your FICO score as gospel. Remember how we said above that your FICO score has variations (and there are even competitive scoring systems)? The number you get, even if you pay for it, still might not be accurate depending on which credit bureau — there are three, Experian, Equifax, and TransUnion. While your credit information should be more or less the same from report to report, the information may vary slightly — say, if one business only reports a debt or payment to one of the three credit bureaus. Something like that could make your perfect score a little less perfect, so it’s better to focus on keeping up generally good finance habits than obsessing over your exact score.

Want to Learn More About Your Credit Score?

Check out The Ultimate Guide to Understanding Credit Scores.