If you try to get a new loan, mortgage, or credit card, potential lenders usually rely on your credit score, which is a number between 300 and 850. This number is based on information in your credit reports and is used to measure your creditworthiness. Most lenders refer to your FICO score. What is FICO?
FICO, formerly known as Fair Isaac Corporation, is a software analytics company that’s been a leader for over 60 years in providing tools for businesses to fight fraud, manage risk and optimize operations. They introduced the first credit risk score in 1981. The company has continued to grow and has gradually developed scores intended for specific industries.
Is FICO the Only Credit Score?
FICO isn’t the only credit scoring model, but it’s probably the one most widely used. Consumers have many different credit scores. Some are specific to a particular credit bureau while others are based on combined information. FICO provides a base score, and it also provides industry-specific scores to meet the needs of different types of lenders. These are scores geared to a certain type of product such as auto loans, credit cards, or insurance.
FICO releases new versions of its scores periodically. The newest version is FICO Score 9. However, some companies continue to rely on FICO Score 8.
Factors That Affect Your FICO Score
FICO scores are calculated based on a combination of factors that appear in your credit report. These factors include:
- Payment history
- Total outstanding credit
- Percent of your total available credit that’s outstanding
- The length of your credit history
- Credit mix
- Number of recent credit inquiries
The importance that each category holds can vary. Usually, your payment history and total debt have the most weight in determining your FICO score.
What’s a Good FICO Score?
Different lenders may have different standards or policies regarding what score they consider a good score, or specifically a score that’s good enough for them to want to take a risk on loaning you money. If you have a score of 740 or higher, it’s considered a very good score, and lenders will see you as a dependable borrower.
Most lenders consider a score between 670 and 739 a good score, while scores between 580 and 669 are usually considered fair. If your credit score is below 580, loaning money to you will probably be considered risky.
Improving Your FICO Score
If you have a fair or poor FICO score, work on bringing it up. Making payments on time and reducing the amount of outstanding debt you have are the two biggest factors that can help to improve your score. Make sure there isn’t any inaccurate information on your credit report. If accounts are showing late payments when your payments were never late or if balances are reporting incorrectly, it can hurt your credit. You may even find duplicate accounts or accounts that belong to someone else on your credit report.
Any inaccurate information that you find should be disputed right away. Want help with this process? Dovly is an automated credit repair engine that can dispute errors for you and works 24/7 to help you fix and maintain your credit. Get in touch with Dovly today.