A single three-digit figure can decide whether you qualify for financing your future house or vehicle, as well as dictate the interest rate you’ll get. Should you be considering applying for a mortgage, credit card, auto loan, or personal loan, keep reading to understand what a FICO score signifies and how it might impact your financial reliability.

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What Does a FICO Score Mean?

A FICO score is a three-digit figure designed to assist lenders in evaluating the credit risk associated with a borrower. Developed by the Fair Isaac Corporation back in 1989, this metric is utilized by more than 90% of U.S. lenders when gauging an applicant’s reliability. Achieving a high FICO score enhances your likelihood of loan and credit card approval, along with potentially obtaining better interest rates.

What Constitutes a Good FICO Score?

The better your FICO score, the more appealing you appear to financial institutions. Conversely, the worse your score, the greater the perception of credit risk among lenders.

The base FICO credit scores vary from 300 to 850. Even though a FICO score of 670 falls into this range,
seen as the start of building good credit

A score of 700 or above will provide access to a wider range of loans along with reduced interest rates.

Below is a detailed look at basic FICO score ranges, which are classified from poor to outstanding.

Bear in mind that this is only one model. The FICO credit score ranges might vary based on which bureau or agency is providing the information. Another bureau could opt for the term “excellent” rather than “exceptional” to describe the top tier of FICO scores.

A borrower’s ultimate FICO score is determined by gathering and assessing information from the different credit accounts held by the borrower.

What Elements Influence Your FICO Credit Score?

Within the FICO scoring system,
credit scores
are determined by evaluating five elements derived from your credit report:

• 
  New credit: 10%
  
• Credit mix: 10%
• Duration of your credit history: 15%
• Amounts owed: 30%
• Payment history: 35%

A FICO score takes into account all five of these elements, rather than just a few, and incorporates both favorable and unfavorable data from your credit report.

How to Locate Your FICO Score

There are several ways to check your FICO credit score. Consider these options:

• Choose the
  free plan from FICO
  .
• Verify if your bank or credit union has a partnership with FICO and offers free scores.
• Verify with your credit card company whether they provide complimentary FICO scores.
• Register for a credit score service; however, keep in mind that a recurring monthly fee might apply.

Moreover, keep in mind that your FICO score could differ from the free credit scores provided by some applications. For instance, Credit Karma offers users credit scores based on VantageScore rather than FICO.

FICO Score versus Credit Score — Are They Identical?

No.

FICO is just one of numerous credit-scoring models that financial institutions utilize to assess loan applicants. Nonetheless, the FICO credit score remains the most commonly adopted model.

Your credit score can differ depending on the credit score provider and the credit-scoring model it uses.

How To Improve Your FICO Score

If your FICO credit score is lower than 670, you may want to find some
ways to boost your score
Apart from reviewing your credit report for inaccuracies and challenging them, consider these additional steps.

Steer Clear of Shutting Down Credit Card Accounts

Closing a credit card account raises your credit utilization ratio. This figure reflects the proportion of available credit you’ve utilized relative to what a lender has offered you through that specific credit card.

Closing a credit card account can potentially reduce the length of your credit history, which could eventually reduce your FICO score. With this in mind, it is advisable to keep your old credit card accounts open.

Pay Your Bills on Time

Consistently making on-time payments sets you up for improving your FICO credit score. Making late payments will surely put you at risk of lowering your score. If necessary, set up automatic
bill payments
to avoid making late payments and their associated fees.

Lower Your Credit Utilization Rate

It’s crucial to maintain credit card balances below 30% of your credit limit. Below are several straightforward methods to decrease your credit utilization ratio:

• 
  Settle your credit card debts.
  
• 
  Ask your credit card issuer for an increased credit limit.
  
• 
  Spend less by using your credit cards fewer times to cut down expenses.
  
  ing.
• Stay away from closing your credit cards.
• Think about initiating a new credit line if it proves beneficial.

Good To Know

Your FICO score might vary due to several factors. Whenever fresh data gets included in your credit report, it’s typical for your score to shift during any particular month.

Certain occurrences that might alter your FICO score encompass submitting a delayed payment, opening a fresh collections account, reducing a credit card balance, and settling a loan.

Cynthia Measom
participated in writing this report.

The piece initially surfaced on
:
What Exactly Is a FICO Score and Why Should You Care?