What is a Fico Credit Score
If you have been planning on getting an auto loan or a mortgage, you have probably heard about a credit score. Although there are many credit scores out there, the one most looked at is a person’s FICO (pronounced F-EYE-CO) Credit Score. FICO (formerly the Fair Isaac Co.) is a company that uses predictive analysis software to measure the credit worthiness of a person. This personal 3-digit number is a crucial part to applying for credit, as it provides a snapshot of information to potential lenders. The score is calculated by a formula using information from your Credit Reports.
The Fico Credit Score range is from 300 to 850, with the higher scores being better. The scores represent an individual’s riskiness in not paying credit obligations. For example, a bank might refuse an auto loan to an individual with a credit score of 400 because it is likely the person will default on the loan. On the other side, a bank might offer an auto loan with lower interest rates to a person with a credit score of 800 as they are seen to be a lower risk to lend to.
A score below 560 is generally considered “Poor Credit” and a score above 720 is generally considered “Excellent Credit”, with an average credit score in the high 600’s. An 850 as a FICO Credit Score represents “Perfect Credit”.
If you are curious about your score, there are many websites that can give you your score (they count as soft inquiries). Two major websites are credit.com and creditkarma.com. They are free to use (they make their money by advertising) and give helpful insights into ways to improve your score. It is a good rule of thumb to check your score a couple times a year to monitor against identity theft.
Written by kprather on Friday December 4, 2015