FICO Score
What Is FICO Score?
A FICO score is the most widely used consumer credit-scoring model in the United States, produced by the Fair Isaac Corporation. It condenses information from a person's credit report into a single number that typically ranges from 300 to 850, with higher numbers reflecting a stronger credit history. The score is built from weighted categories. Payment history is the largest, at roughly 35 percent, followed by amounts owed, including credit utilization, at about 30 percent. Smaller components include the length of credit history, credit mix, the variety of credit types such as revolving and installment accounts at roughly 10 percent, and recent applications for new credit. Lenders use versions of the score as one standardized input when evaluating applications, alongside other information they gather.
Why It Matters
A FICO score matters chiefly because it affects the interest rates and terms a borrower is offered, so the same loan can cost different amounts for people with different histories. Because payment history and amounts owed together dominate the calculation, on-time payments and the share of available credit in use tend to move the number most. The score draws on data compiled by the three major credit bureaus, Equifax, Experian, and TransUnion, whose reports consumers can obtain free at least once a year. Understanding the weighting explains why a single missed payment can matter and why a late payment can remain on a report for up to about seven years. The model turns a complex file into a comparable figure lenders can apply consistently across applicants.
Test Your Knowledge
Questions on this topic from the EconRecall fact bank:
- What is the most widely used credit scoring model in the U.S., commonly abbreviated by a single name?
FICO (score) - What is the largest single factor in a standard FICO credit score, at roughly 35%?
Payment history - What is the second-largest factor in a standard FICO score, at roughly 30%?
Amounts owed (including credit utilization)