The acronym FICO stands for the Fair Isaac Corporation.  FICO is the largest and best known of several companies that provide software to calculate a person’s credit score.  Your credit score gives lenders an idea of how risky it would be to lend money, or rent or sell property to you.

Why is it important?

Just because you want to purchase something doesn’t mean that people are eager to lend you money for that purpose.  Lenders (and landlords) look at your credit score to determine whether or not you are creditworthy.  We depend on credit for so many important things in life -- whether it is for buying a car, house or computer or getting a student loan (private lenders check your credit).  A three-digit number -- your credit score -- can determine whether you can do these things and even how much it will cost you.

What’s in my FICO Score?

The FICO® Score is calculated from several different pieces of data in your credit report. This data is grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining how your FICO Score is calculated.

Your FICO Score considers both positive and negative information in your credit report. Late payments will lower your FICO Score, but establishing or re-establishing a good track record of making payments on time will raise your score.

How a FICO Score Breaks Down

If you don’t have any credit yet, it may take about 6 months to establish your credit history and get a FICO score once you open your first credit account.  As time passes and you continue to use your credit responsibly, you will see your FICO score rise. As your FICO score gets into higher ranges, more credit may become available to you and at better terms. When utilizing your access to credit, keep this in mind: only apply for credit that you need and always pay your bills on time.