Chances are you’ve heard of your FICO score and consider it pretty much interchangeable with your “credit score.” This article will explore how one corporation came to be synonymous with the “credit scoring” industry and give a little insight into their process of assigning a number to your credit history.
Introduced in 1989 by Fair, Isaac and Company (FICO), a majority of banks and creditors now use the score to guide the loan or credit process. FICO uses reports from the three national credit bureaus – Experian, Equifax, and TransUnion – to calculate these scores.
As you probably know form using a service like Credit Karma to check your own credit score, the classic score can vary based on the information provided by the credit bureau. The score is based on the following factors:
The FICO score ignores the following:
There are several other types of FICO scores including bankcard, personal finance, mortgage, installment loan, or auto loan. The range for the classic FICO score is between 300-850. The scores generally line up like this:
300-629: Bad credit
630-689: Average/fair credit
690-719: Good credit
720 and up: Excellent credit
According to FICO, the median average score was 711 in 2011. In 2003, the passing of the Fair and Accurate Credit Transactions Act allowed consumers to get a free copy of their credit report once a year from each of the credit bureaus. For your own free copy, check out Annualcreditreport.com (and don’t fall for fake competitors who will try to charge you!)
Still have questions about FICO? Ask us in the comments.