What is a FICO Credit Score?
A credit score is a mathematical model consisting of numerous variables used to estimate one's credit risk. The most commonly used model is called FICO ® (named after its creator, the Fair Isaac Company).
Your FICO ® credit score is used to evaluate your creditworthiness by giving you a certain amount of points based on the information contained in your credit report and your debt-to-income ratio. The highest score a person can receive is 850; the lowest is 300, but generally, a score of 720 or higher means your credit is considered to be good (but it could be improved). A score below 660 means that you might have trouble obtaining credit or you will definitely have to pay a higher interest rate for the financing you do receive.
It should be noted that not every single lender uses the FICO ® model; however, the models they use are very similar to it. Also, lenders vary in what is important to them in terms of loan approval. One lender might place more weight on payment history, while another places more weight on income.
Typical Credit Score Composition:
35% Past payment history
30% Outstanding debt
15% Length of credit history
10% Recent credit applications
10% Types of credit and loans (loan mix)
Do You Know What Your Credit Score Is?
If your FICO credit score is 750 or above, you are considered to be an excellent credit risk and should not have a problem obtaining credit and will likely be offered financing at the lowest available rate. Your goal should be to obtain a 750 or higher FICO credit score so that you can save thousands on mortgage and car loans and credit cards.
How to Order Your FICO ® Credit Score
You can order your credit score at any one of the three credit reporting agencies also known as credit bureaus -- Experian, Equifax or TransUnion; however, the credit score they will give you is not the official FICO score that mortgage and auto loan lenders use to evaluate your credit. You can order your official FICO credit score at myFICO.com. Your credit score will vary at each of the credit bureaus since they don't have the same mix of information about you.