FICO Score

Your credit score is a numeric snapshot of your credit history. It’s like a grade that lets lenders know how creditworthy you are. The higher your credit score, the better. The most commonly used credit score is the FICO score, named after its creators.

Banks use FICO scores to make quick yes-no decisions about applications you make. FICO scores are also used to determine the interest rate for your credit cards and loans. Borrowers with higher FICO scores generally receive lower interest rates.

What’s in your FICO score?

FICO scores range from 300 to 850 and are calculated based on five different categories:

1. Payment history measures how timely you pay your bills and counts for 35% of your FICO score. Public records like bankruptcy, judgments, liens, and collection accounts affect the payment history portion of your FICO score.
2. Amounts owed measures the amount of your available credit you’re using along with the balance of installment loans. This is 30% of your score.
3. Length of credit history is 15% of your FICO score. It measures the time since accounts have been opened.
4. New credit is 10% of your score. This considers the number of accounts you’ve opened recently and number of credit inquiries recently made.
5. Type of credit used looks at the number of and different types of accounts you have on your credit report. This is 10% of your credit score.

Your FICO score is based only on information that’s available in your credit report. So, certain things won’t impact your FICO score including: you race, color, religion, age, marital status, gender, income, where you live, and whether you’re receiving credit counseling.

Why you have different FICO scores

You have three FICO scores, one for each of your three credit reports from Equifax, Experian, and TransUnion.

Because the information in your credit report is always changing, your FICO score also changes. Additionally, your FICO score might be different based on each credit bureau. That’s because your credit reports are often different from each other. One credit report might contain information that another credit report does not resulting in a difference in your FICO score.

Not everyone has a FICO score. If you don’t have any accounts, FICO won’t be able to calculate a score for you. You should have at least one account that’s at least six months old and has been reported to the credit bureaus within the past six months.

There are other generic credit scores out there. For example, each credit bureau has their own credit scoring model. These scores aren’t as widely-used as the FICO score.

Score Watch from myFICO.com offers a free FICO score and 30-day trial of its credit monitoring service, then charges $8.95/month for membership after that. Other online sites may offer free credit scores as well, but they are probably not free FICO scores.

Maintaining a good FICO score

Building a good FICO score isn’t difficult. One of the main things you can do to have a good FICO score is pay your bills on time. Late payments have a significant negative impact on your FICO score. The next thing you should do is keep your debt level low. When you make credit card purchases, keep them below 30% of your credit limit. Avoid opening new accounts. Not only will the additional credit inquiries affect your score, new accounts will lower your credit age.

It’s a good idea to check your FICO score periodically. Your Equifax and TransUnion are both available for purchase from myFICO.com. Unfortunately, even though lenders can still view your Experian-based FICO score, you cannot purchase it. Instead, you might consider using a free FICO score estimator to get an idea of your Experian-FICO score.