Most people have a credit score and know that it’s important, but not everybody knows that there are actually different kinds of scores that measure your financial responsibility. The most popular and widely used of these is the FICO credit score. 

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Whether you’re looking to get a credit score, preparing to get a loan, or simply curious about the industry standard of credit scores, this guide will help you understand what a FICO score really means.

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What Is A FICO Score?

Created by the Fair Isaac Corporation, a FICO Score is a type of credit score that is used by over 90% of the USA’S top lenders. These are three-digit numbers ranging from 300 to 850. 

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Credit scores help lenders understand your financial behavior, mostly to gauge how likely you are to make your payments on time. The higher your score is, the lower your risk is to the lender – this often translates to better rates or terms on any credit you apply for.

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While different lenders issuers may have different credit score requirements, the following are the generally accepted ranges and categories:

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

What Are The Different Types Of FICO Scores?

FICO scores are used in a variety of industries that have different needs and qualifications. To reflect these differences, FICO has two distinct score categories: the base FICO score and industry-specific FICO scores.

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Base FICO Score

A base FICO Score is what the company provides to lenders in varying industries, ranging from 300 to 850. A good base FICO Score ranges between 670 and 739.

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Industry-Specific FICO Scores

Industry-specific FICO scores are designed for credit card issuers and auto lenders. These scores have a much wider range from 250 to 900. Like the base FICO score, a good industry-specific score falls in the range of 670 to 379.

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When Do You Need One?

Consumers mostly need a FICO score if they’re looking to borrow money, say if you want to get a credit card, buy a house, a mortgage or start a new business. Before you can take out a loan, for example, banks will look at your FICO Score to see if your history indicates you have managed your debt obligations responsibly.

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Qualifications 

Though everyone can get a FICO Score, you need to meet certain criteria before your FICO Score can be calculated:

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• Have an open account for more than six months
• Within the past six months, your account has been reported to a credit reporting agency or to a credit bureau
• Have no reference of “deceased” on your credit report or associated with your Social Security Number

If you share an account with someone who is declared deceased, it could impact your credit report. Notify your bank or creditor immediately to keep your credit score accurate.

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Factors that Impact your Credit Score

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Your credit score comes from the information found on your credit report.  Factors that impact your FICO Score fall into one of the following five categories:

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

FICO Score vs. Other Competitors

But how does a FICO Score fare to other types of credit scores? Is there a difference? Let’s take a look at some of the features and benefits a FICO Score has compared to its competitors:

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Where To Check Your FICO Score

US citizens are entitled to one free credit report every 12 months, which they can access through one of the three authorized agencies: Transunion, Equifax, and Experian or via freecreditreport.com.   While the credit report is free via these sites, there is an additional charge for your credit score.

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Over 100 banks across the US can also give you your FICO Score, including widely-known names such as Citi, HSBC, and Bank of America. Other banks like Wells Fargo and Chase even allow you to check your FICO Score online at no additional cost!

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Maintaining Your FICO Score

Getting a FICO Score is one thing; maintaining a good FICO Score is another thing altogether. Follow these tips to improve or maintain your FICO score:

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• Pay your bills on time: Being behind on payments can negatively impact your FICO Score, so make sure you pay things such as your bills on time. But if you can’t, then at least pay the minimum amount every month so that you won’t have any late or missing payments on your report.
• Be responsible when using your credit cards: Keep your balances on credit cards low (under 30% of the credit line), as using a large portion of your available credit can lower your score. 
• Check your credit report regularly: Review your credit report on a regular basis, so that you can catch any errors before it negatively impacts your credit application. Keep in mind that checking your score on your own is considered a soft inquiry, so it will not affect your score.

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Conclusion

FICO scores are used by more than 90% of lenders to determine a borrower’s creditworthiness. The higher your score, the more types of credit you can qualify for and you will have better interest rates available. It is important to be educated about FICO scores and know your own, as this helps you make the right decisions and be responsible with how you manage your credit.

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