FICO score is a three-digit number which is also known as a credit score. It represents the creditworthiness of a borrower. It is the key to determining which financial products, including credit cards and personal loans, that you’ll qualify for. The three major credit bureaus that offer your FICO score are Experian, Equifax, and TransUnion. These three credit bureaus use two credit scoring models known as VantageScore and FICO® score in determining your credit score.
It was introduced thirty years ago by Fair Isaac Corporation, a data analytics company that is most commonly known as FICO. This company introduced a simple yet effective medium of helping credit bureaus interpret consumers’ credit reports. This led the company to create an industry standard for scoring creditworthiness which has become the most widely used scoring model.
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Factors that go into Calculating Your Score
It is best you know what goes into calculating your FICO score, as this will help you develop a good credit habit. If you have one already, it will help you stick with it. So here I will be analyzing all the factors that go calculating your score.
Here are the things that go into determining your FICO scores.
Payment History (35%)
Your credit payment history is a big factor when determining your FICO scores. Lenders want to know if you are in the habit of paying your bill on time.
Amounts Owed (30%)
This is the amount you owe on credit accounts, like installment loans and credit cards as well as the percentage of your available credit that you are using which is known as your credit utilization rate.
Length of Credit History (15%)
This accounts for how long you have had your oldest and your newest accounts. The average age of all your accounts are also considered and how long it’s been since you’ve used certain accounts.
Credit Mix (10%)
FICO scores also take into consideration your mix of different credit accounts, even though it is not a key factor. These can include credit card accounts, mortgage loans, and auto loans.
New Credit (10%)
This refers to new credit inquiries and recently opened accounts that can influence your FICO scores.
What are the Ranges?
FICO score can be broken up into five ranges. They include the following:
- Excellent: 800 – 850
- Very good: 740 – 799
- Good: 670 –739
- Fair: 580 – 669
- Very poor –300 – 579
There are over a dozen FICO credit score versions. They are broken up into base scores and industry-specific scores. Base scores help lenders in determining the likelihood that you’ll repay any credit obligation, be it a credit card bill or loan payment. Industry-specific scores on the other hand represent the odds that you’ll repay a specific loan, like an auto loan or mortgage.
Here’s a breakdown of the commonly used versions and what they are used for:
- Firstly, The most widely used: FICO Score 8
- Secondly, For credit card decisions: FICO Bankard Scores 2, 4, 5 and 8: Score 3
- Furthermore, Auto lending: FICO Auto Scores 2, 4, 5 and 8
- For Mortgage lending: FICO Scores 2, 4 and 5
- Lastly, Newly released versions (which are not widely used for now): FICO scores 9, FICO Auto Score 9, FICO Bankard Score 9, and FICO Score 10.
How to Get a Free FICO Score
There are numerous ways you can get your FICO score for free.
Apart from getting your free FICO score from annualcreditreport.com, there are also some issuers that offer free FICO scores. They are:
- American Express credit cards
- Bank of America credit cards
- Citi credit cards
Also, there are online resources that offer free access to anyone regardless of whether you are a cardholder or not. They include:
- Discover Credit Scorecard.