FICO Scores
Understanding FICO Scores
Defintion
A FICO Score is a type of credit score created by the Fair Isaac Corporation. It is used by lenders to assess the credit risk of a borrower and to make lending decisions. FICO Scores are based on credit reports and range from 300 to 850, with higher scores indicating lower credit risk. The FICO Score was introduced in 1989 by the Fair Isaac Corporation. It has since become the most widely used credit scoring model in the United States. FICO Scores are calculated based on five major components: Payment History (35%): Timeliness of past payments. Credit Utilization (30%): The ratio of current credit card balances to credit limits. Length of Credit History (15%): The age of your credit accounts. New Credit (10%): Newly opened credit accounts. Credit Mix (10%): The variety of credit accounts, such as credit cards, mortgages, and auto loans.
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Frequently Asked Questions:
Base FICO Scores
These are the standard scores used by lenders to assess general credit risk. The most common versions are:
FICO Score 8: Widely used by lenders.
FICO Score 9: Includes some updates, like ignoring paid collections and treating medical collections differently.
Other FICO Scores
FICO Auto Score: used by auto lenders.
FICO Bankcard Score: used by credit card issuers.
FICO Score 2, 4, 5: Older versions still used by some mortgage lenders.
FICO Score 10 and 10T: Newer versions that include trended data, offering a more comprehensive view of credit behavior over time.
