What Is a FICO Score?


If you’ve ever attempted to get a loan or applied for a credit card, you’ve likely heard the term “FICO score” mentioned on more than one occasion.


However, if you’re just establishing your credit, or if you’ve never really paid attention to your credit in the past, understanding what the FICO is and what it means can be challenging.

This article covers everything about FICO scores. It includes what they are, how they are calculated, the different types of FICO scores, and what they are used for. We also cover some other, less commonly used types of consumer credit scores and how they compare to the FICO.

What does FICO stand for?

FICO is an acronym for the Fair Isaac Corporation, the company that developed the FICO score. The company was founded in 1956 by engineer Bill Fair and mathematician Earl Isaac. Their aim was to create a data-driven system for evaluating consumer credit risk.

Today, the FICO score is the most widely used credit score in the United States and has become a standard for assessing creditworthiness.

What is a FICO score?

FICO scores are used credit scores by over 90% of lenders and credit card issuers to determine whether to approve you for a loan or a credit card.

The Fair Isaac Corporation gets information from all three credit reporting agencies (Experian, Equifax, and TransUnion). They use the information in your credit file to calculate three different FICO scores—one for each credit bureau.

As the information in each credit report changes, your FICO score will change as well. It can change month-by-month or even day-by-day as your creditors report new activity on your account.

Multiple Versions of FICO Scores

FICO regularly updates the algorithm to calculate your FICO scores. When they do this, they update to a new ‘version’ of the FICO. Currently, the newest version is FICO 9. It has several changes to how certain items are factored into your credit score. In particular:

  • Paid collections no longer have a negative impact.
  • Medical collection accounts have less of a negative impact.
  • Rental history, when reported by your landlord, is now factored in. This change can help renters to establish a positive credit history even if they don’t have other forms of credit.

What is the FICO score range?

FICO scores range from 300 to 850, with higher scores indicating lower credit risk. Here is a breakdown of the range:

  • 300-579: Poor credit
  • 580-669: Fair credit
  • 670-739: Good credit
  • 740-799: Very good credit
  • 800-850: Excellent credit

Keep in mind that the specific credit score range used by lenders may vary, and different lenders may have their own criteria for evaluating credit risk. Additionally, the specific credit score needed to qualify for a particular loan or credit card may vary based on the lender’s underwriting standards and other factors.

Different Types of FICO Scores

Beyond the regular changes that happen as their credit scoring model is updated, there are also several types of FICO scores. Each one is designed to help lenders determine specific kinds of credit risk. The most common types are:

  • Auto Score – determines how likely you are to default on an auto loan or lease
  • Mortgage Score – determines how likely you are to default on a mortgage loan
  • Credit Card Score – determines how likely you are to default on a credit card or store charge card account
  • Installment Loan Score – determines how likely you are to default on a large installment loan
  • Personal Finance Score – determines how likely you are to default on a smaller installment loan

For all of these different types of credit scores, a special set of FICO scores is used, which is not on the same scale as the general FICO score.

In addition, these scores assess the likelihood that you’ll default in the next two years, but only for their specific focus. For example, an Auto FICO score will only measure the risk of your default on your auto loan, not your mortgage.

Multiple Versions of Industry-Specific FICO Scores

To further complicate matters, FICO regularly updates these special industry-specific credit scores to be more accurate. Like the general FICO score, there are multiple versions of each industry-specific FICO score.

What this means is that a typical person doesn’t just have one or two FICO scores. Instead, everyone has dozens of FICO scores.

This is one of the many reasons why one lender may decline a credit application while another approves the same application. Different versions of the same FICO score or the same type of score taken from different credit bureaus will almost always be different.

How are FICO scores calculated?

Fortunately, standard FICO scores are calculated using a fairly consistent method from one version to the next. The general breakdown of how they’re calculated is as follows:

  • Payment History – 35%
  • Amounts Owed – 30%
  • Length of Credit History – 15%
  • New Credit – 10%
  • Credit Mix – 10%

As you can see, the vast majority of it boils down to payment history, how much debt you carry, and how long you’ve had credit in your name.

While the industry-specific scores will weight things a bit differently, these main factors will still be important in calculating your FICO scores.

Understanding the FICO Score Calculation in Detail

As mentioned earlier, FICO scores are calculated using five main factors. Let’s take a closer look at each of these factors and how they affect your credit score:

Payment History (35%)

This is the most significant factor in your FICO score calculation. Your payment history reflects whether you’ve paid your credit accounts on time. Late payments, delinquencies, collections, and bankruptcies can negatively impact your score. To maintain a good payment history, make sure to pay all your bills on time, even if it’s just the minimum payment.

Amounts Owed (30%)

This factor, also known as credit utilization, measures the proportion of your credit balances to your credit limits. High credit utilization can signal that you’re overextended and may struggle to manage your debt. To improve this aspect of your credit score, try to keep your credit card balances low and avoid maxing out your credit cards.

Length of Credit History (15%)

The length of your credit history considers the age of your oldest account, the age of your newest account, and the average age of all your accounts. A longer credit history generally results in a higher credit score, as it demonstrates that you have more experience managing credit. To maintain a healthy credit history, avoid closing old accounts, even if you no longer use them, as this can shorten your credit history.

New Credit (10%)

Opening multiple new credit accounts in a short period of time can indicate greater risk and negatively affect your credit score. When you apply for new credit, a hard inquiry is made on your credit report, which can lower your credit score temporarily. To minimize the impact of new credit, apply for credit only when necessary and avoid opening multiple accounts within a short timeframe.

Credit Mix (10%)

Having a diverse mix of credit accounts (such as credit cards, mortgages, and auto loans) can positively affect your credit score. This factor shows that you can manage various types of credit responsibly. While it’s not necessary to have one of each type of credit, maintaining a diverse credit mix can help improve your score over time.

Factors That Do NOT Impact Your FICO Scores

There are also several factors that Fair Isaac Corporation says are never part of the calculations that determine your FICO score. These items are:

  • Age
  • Gender
  • Salary
  • Location

Lenders may factor in your income, what kind of job you have, or other outside circumstances when it comes to approving your application for credit. However, FICO does not take these into account when calculating your credit score.

How do I check my FICO score?

If you want to know what your FICO score is, you can check it before applying for a loan to have peace of mind. The simplest way to get access to your FICO score is to order it. Unlike your consumer credit reports, you will have to pay for it, either through a third-party service or directly through Fair Isaac Corporation.

We recommend going directly through FICO if you need a full overview of the various credit scores. However, if you decide to go the third-party route, make certain the credit score you are purchasing is an authentic FICO score.

FICO Score vs. VantageScore

VantageScore is a credit score created by the three major credit bureaus (Experian, Equifax and TransUnion) to compete with FICO.

It has many similarities, including using the same score range (300 to 850) and using past payment information to predict the risk of future defaults. However, there are a few key differences, including:

  • VantageScore does not weigh paid collection accounts negatively. The latest version of the FICO also reduces the impact of paid collections. However, the new version of FICO is not widely used at the time of this writing.
  • VantageScore counts late mortgage payments against your credit more than other types of delinquent payments.
  • If you are hit by a natural disaster, the VantageScore takes that into consideration
  • You have only 14 days to rate shop with a VantageScore – with a FICO, you may have up to 45 days to find the best loan.

Given that roughly 90% of lenders are still using FICO, VantageScore isn’t a major player yet. If you need to know for certain whether a lender will approve your credit application, check your FICO scores. These are the ones most likely to be used by any creditor you choose.

FICO vs. TransRisk

TransRisk credit scores are provided by TransUnion only, and specifically through Credit Karma. The algorithm of how the credit score is calculated and what factors into improving the credit scores isn’t well-known.

Aside from being freely available to consumers via the Credit Karma website, there is not much benefit to the TransRisk score.

It is not used by many lenders or creditors, and therefore knowing your credit score isn’t useful for getting approved. However, it can help you track the general improvement of your credit over time, so it can be useful as a monitoring aid if nothing else.

What’s a good FICO score?

A “good” FICO score can be a bit of a moving target, as it largely depends on your financial goals and the type of credit you’re seeking. Are you aiming to buy a new home, secure a high-limit credit card, or obtain a personal loan? Each scenario comes with its own set of FICO score requirements.

Although there’s no one-size-fits-all answer, we can provide some general guidelines to help you understand the FICO score ranges you’ll need for various types of credit:

  • Mortgages: A FICO score of at least 640 is typically required to qualify, but a score of 720 or higher can land you the best rates.
  • Auto loans: While a 620 FICO score may get you a basic rate, you’ll need a 740 or higher to access the most favorable terms.
  • Low-interest credit cards: To qualify, you’ll want a minimum FICO score of 640. However, a score of 720 or above can unlock the best rates.

Keep in mind that lenders may pull your FICO score from more than one credit bureau and could use different FICO score versions when making lending decisions. Your personal financial history also plays a role in their assessment.

With this in mind, it’s wise to shop around for the best rates—especially if your credit scores are close to prime or super-prime territory. Comparing offers can help you find the most advantageous terms for your specific situation.

How can I improve my FICO score?

On the other hand, if your FICO scores are too low to qualify for the rates you deserve, there are several things you can do to boost your scores:

  • Apply for a secured credit card: A secured credit card requires a cash deposit as collateral. Your credit limit will typically be equal to the deposit amount. Make sure the card issuer reports your activity to the credit bureaus.
  • Get a credit-builder loan: A credit-builder loan is a small loan designed to help you build credit. The lender holds the loan amount in a savings account, and you make monthly payments until the loan is paid off. Once the loan is fully repaid, you receive the funds, and your on-time payments are reported to the credit bureaus.
  • Become an authorized user: If a family member or close friend has a good credit history and is willing to add you as an authorized user on their credit card account, this can help boost your credit score. Keep in mind that both the primary cardholder and the authorized user’s credit can be affected by each other’s financial actions, so make sure to use this strategy responsibly.
  • Reduce your credit card balances: Carrying a high balance can signal significant risk of default and lower your credit scores all around. Prioritize paying off high-interest debt, such as credit cards, to reduce your credit utilization and save money on interest.
  • Make your payments on time consistently: Pay your bills on time, create a budget, save for emergencies, and be mindful of your credit utilization. Regardless of your current credit situation, maintaining good financial habits is essential for long-term credit health.
  • Remove negative credit accounts from your credit report: Are there late payments that were actually on time? Multiple collection accounts for the same debt? Debt listed as higher than your records indicate? All of these are errors on your credit report hurt your credit score, and getting them removed can help you to qualify for credit sooner rather than later.

Don’t be discouraged if the credit scores you’re seeing aren’t the same as the ones you see in the bank or the auto dealership. Just be prepared to keep working at it and building your credit over time.

Lauren Ward
Meet the author

Lauren is a personal finance writer who strives to equip readers with the knowledge to achieve their financial objectives. She has over a decade of experience and a Bachelor's degree in Japanese from Georgetown University.