By Chris O’Shea
What you need to know about FICO scores
A FICO score is a three-digit number used by lenders to determine your creditworthiness. FICO score is a version of a credit score. VantageScore is the other one that is widely used. If you are still curious about FICO scores, here are all of your questions answered.
What does FICO stand for?
FICO stands for Fair Isaac Corporation, which created the FICO score in 1989.
How is FICO calculated?
Your FICO score is made up of the following components:
- Payment History (35%): Make bill payments on time and that will help your score.
- Total Debts to Total Credit Ratio (30%): How much of your total available credit you’re using? The less credit you’re using, the better your score. You don’t want to be using any more than 30% at any time.
- Credit History (15%): How long you’ve had your various credit accounts. The longer, stronger payment history, the better.
- Recent Inquiries (10%): Hard inquiries (applying for a mortgage, credit card, auto loan, personal loan, etc.) can lower your score temporarily.
- Credit Mix (10%): The more variety of credit accounts you have, the better.
What is a good FICO score?
A good credit score or FICO score is usually between 690 to 719. FICO score’s complete range is from 300 to 850.
Why is a Good Score Important?
It’s important to have a high FICO score or VantageScore so that you get the best credit card offers, mortgage terms and rates. The higher your score, the better your offers will be. Your score can also be used by landlords to determine if you land that apartment you’ve been wanting. A higher score indicates that you will likely pay your rent on time.