What Is A FICO Score?

Answer:
FICO is short for Fair Isaac Corporation. This

is the corporation that created the most commonly used credit scoring system in the United States. The FICO score is the numerical representation of the credit worthiness of an individual, based on a statistical analysis of their payment history.

The Fair Isaac Corporation was founded in 1956 by an engineer, Bill Fair, and a mathematician, Earl Isaac. They started building their scoring system in 1958, and it is based on a statistical analysis of their credit report. They continued to work on perfecting their system, and they introduced the Fair Isaac bureau scores in 1981.

This numerical value is intended to gauge a person’s worthiness for credit, or in other words, to validate the likelihood of their defaulting on a loan or obligation. Over the years, it has shown to be very accurate. Outside of individuals at the Fair Isaac Corporation, no one knows the exact formula that they use to calculate the FICO credit score. They take many factors into consideration. They look at the length of your credit history, the type of credit that has been issued to you, the amount of available credit that is currently used, your payment history, as well as recent credit inquiries. Technically, this point system has a range of 0 to 999. However, most of these scores fall in the range of 330 to 850, with 330 being a poor score and 850 being an excellent score.

All three credit bureaus (Experian, Equifax, and TransUnion) can all give you your FICO credit score. Whenever you apply for credit, such as a credit card, personal loan, car loan, or mortgage, the creditor will examine your credit report, which they will receive from one of the three credit reporting agencies. They will use this report in order to determine whether or not to issue credit to you. You are also entitled to one free credit report per year from each of the reporting agencies.

The numerical FICO score is not without controversy, however. In order to maintain a high credit score, you must continually borrow and pay off debt, which gives no indication of your overall health. If someone refuses to borrow money and instead pays cash for things, they will have a poor credit score, whereas someone with no savings but continually borrows and pays off debt will have a very high credit score.