What is a FICO Score, Anyway?
You’ve got one. And your bank, employer and creditors know what it is. But do you?
Today, we have plenty of opportunities to make quick judgment calls about anything. We can read movie reviews before heading to the theater, check out a restaurant’s health inspection grade before ordering the sushi, even creep on someone’s Instagram before we decide whether or not to let them into our squad. So, who’s creeping on us?
Well, the answer is… everyone. From banks, landlords, even employers, the modern world is checking up on us before they make business, credit, even hiring decisions. A credit score is a quick way for someone to tell—at a glance—if we’re credit-worthy or not.
When people talk about a credit score, what they really mean is an actual number, or your FICO score. Created by Fair, Isaac and Company (FICO) in 1989, the FICO score is determined by both positive and negative information from your credit history. It breaks down like this:
35% Payment History — Have you paid past debts on time or are missed payments still showing up in your history?
30% Amounts Owed — This is a mix of debt measurements, including your debt to limit ratio, number of accounts with balances and more.
15% Length of Credit History — Do you have a long, healthy history of credit, or short (or no) credit history?
10% Credit Mix — How many different types of credit are you using? Is it just one credit card, or is it a wide variety of different credit and loans?
10% New Credit — Opening a number of new credit cards in a short amount of time can have a negative impact on your FICO score.1
All of this information is collected, blended on high, and the result is a score between 300 and 850 (read more in By the Numbers: Your FICO Credit Score). This is your FICO score. If it’s on the lower end, you may be considered a “riskier” candidate for credit, loans, and jobs. That can be a major bummer. Of course, no one wants to be seen as a low score. (If you do have a low FICO score and need a loan, you may consider no credit check loans—but it can come with its share of drawbacks and advantages so you’ll need to do your research. Many lenders offering “bad credit loans” are actually predatory, dangerous lenders. You can learn how to identify and avoid predatory lenders in our OppLoans ebook “How to Protect Yourself from Payday Loans and Predatory Lenders.”
The good news is that this number can always be improved with strategic financial choices. OppLoans provides resources, online courses, tools and financial products that help our customers improve their FICO scores every day.
Contact us today and our Loan Advocates will answer your questions.
1 “What’s in my FICO Scores” MyFICO.com http://www.myfico.com/credit-education/whats-in-your-credit-score/. Accessed September 11, 2017.