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What is a FICO Score?

Do You Know What A FICO Score Is?

What Are Credit Scores?

Credit scores are what influences the credit that lenders might make available, as well as the terms and interest rates associated with them.

credit score calculation pictogram

They’re vital components of credit health.

Whenever a consumer applies for some credit, be it a mortgage, an auto loan, or just a credit card, then lenders would like to know the risk they’d take in loaning the money out. When a lender obtains a credit report, they might also buy a person’s credit score based on any information available in that report. Credit scores help lenders analyze credit reports since it’s a number which summarizes credit risk, and that’s based on a current snapshot of the larger credit report at a certain point in time.

It’s crucial to know that not all credit scores offered online for sale are FICO Scores.

Regarding FICO Scores

The Fair Issac Corporation created FICO Scores, which are the most frequently used. Ninety percent of the top lenders make use of FICO Scores to guide them in making billions of decisions related to credit each year. FICO Scores are only calculated based on information that credit reporting agencies maintain through their consumer credit reports.

In comparing all this information to patterns created from hundreds of thousands of previous credit reports, your future level of credit risk is estimated by a FICO Score.

What Are Good Credit Scores?

Base scores work in a range of 300 up to 850. Higher scores mean lower risk. However, no score suggests a particular individual is going to be a good customer or a bad one.

While quite a few lenders make use of these scores in their lending decisions, every lender will employ its own strategy, which includes the risk level it deems as acceptable for a particular credit product. There’s no one cutoff score which all lenders use. Also, there are quite a few other additional factors which lenders use in determining your actual rate of interest.

Reasons Behind Your Credit Score

Anytime a FICO Score gets calculated based on your credit report, that credit reporting agency might also offer as many as five different reasons which were the primary factors influencing that score. The listed reasons tend to be negative, since they’re the specific reasons why your credit score actually isn’t higher.

Calculating A FICO Score: The Minimums

In order for any FICO Score to get calculated, a credit report from a bureau for that score calculation has to have sufficient and recent information to base a credit score on. Typically, that would mean you have a minimum of one account that’s open for longer than six months, and a minimum of one account reported to that credit bureau over the same time period.

Every Credit Bureau’s FICO Scores

You get FICO Scores for every one of the three primary credit bureaus of Experian, TransUnion, and Equifax. Every score gets based off information which the credit bureaus maintain in their files about you.

FICO Scores from every credit bureau only consider the data from the credit reports you have in that bureau. Your credit scores can easily be different at every credit bureau. If you have different credit scores at each bureau, then it’s likely due to that information at the bureaus being different.

Scores Do Change Over Time

As the available information in the various credit reports changes, so too will any new credit scores that are based on the credit reports. As such, the FICO Scores you had last month aren’t likely to be the same scores that lenders would receive from credit bureaus today.

Other Various Credit Scores

While FICO Scores get used by nearly all top lenders, they’re not the only credit scores available to consumers. It’s possible that these other credit scores would evaluate credit reports very differently than FICO Scores. If you buy a credit score on your own, it’s a good idea to get your score, since they’re used for 9 out of 10 lending decisions.