What's the deal with FICO Scores?

If you’re preparing to buy a house, car, or anything else that costs more than your bank account balance, get to know your FICO® Score. Even if you don’t plan on spending a sizeable chunk of cash in the near future, your credit health can affect other areas of your life — from whether you pass a tenant screening to how much you pay for insurance.

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First things first, what exactly is FICO short for? FICO is an abbreviation for the Fair Isaac Corporation, the first company to offer a credit-risk model with a score, and named after Bill Fair and Earl Isaac, the founders.

What is a credit score?

A credit score is a numerical expression of your creditworthiness. Scores typically range between 300 and 850 and are based on credit history data usually sourced from one of the major credit reporting bureaus: Experian®, Equifax®, and TransUnion®. Companies use scores to gauge the likelihood that you will make payments as agreed.

What is my FICO Score?

You might be surprised to learn that you have more than one FICO Score.
Credit scoring agencies, like FICO, use various calculations or scoring models to compute your score. Many models exist, with new, improved versions introduced periodically to better assess credit risk. Depending on who requests your score, they may receive a score modeled for a specific industry, e.g., credit card issuers.
Companies may ask for older or newer versions of a scoring model to predict how well you’ll handle new payment responsibilities. Scores also vary based on the model and the credit reporting bureau information used in the calculation. However, reviewing FICO Score 8 is often the most reliable way to assess your credit score health. It is the most widely used version today, and Experian allows consumers to check their FICO Score 8 for free by visiting their website.


Is FICO the only credit scoring agency?

No, VantageScore® is another credit scoring agency some businesses use to check the credit health of applicants. This agency, founded by Experian, Equifax, and TransUnion, uses a different scoring model than FICO. However, its purpose is the same — provide lenders with a snapshot of your ability to handle credit responsibility while giving you the tools to monitor your credit health.
As with FICO, you may have different scores, depending on which model is used in the calculation.
Check your VantageScore for free on their website.


4 Ways to Raise Scores

A good credit score could result in more favorable repayment terms, lower credit card interest rates, and better chances for approval on big-ticket items such as a car or home. Maintaining a high score is a crucial step toward achieving financial freedom. Generally, you can boost your credit score if you:


  • Pay all bills on time. Even missed payments made to noncredit-based accounts, e.g., cell phone companies, can harm your score if the account is sent to collections.

  • Keep credit account balances low. Credit accounts that linger near their authorized limits can sink your score since high account balances signal you might be overextended. 

  • Maintain different types of accounts. While this isn’t reason enough to open multiple credit lines, successfully managing credit card payments and an auto loan payoff could increase your score.

  • Avoid closing old accounts even if you only use them periodically. Older accounts show an extended credit usage history that could bump up your score.


The weight of each activity varies by credit scoring agency. Understanding the basics of credit will help you handle debts responsibly, make smart financial decisions, and improve your credit score.