What is a FICO Score?
A FICO score is not the same as a credit score. The Fair Isaac Corporation (FICO) created FICO Scores about thirty years ago in order to provide an industry-standard for scoring creditworthiness that was fair to both lenders and consumers. A FICO Score, like a credit score, is a three-digit number that is basically a summary of your credit report. It measures how long you've had credit, how much credit you have, how much of your available credit is being used and if you've paid on time. It provides a tool to help lenders decide who to lend money to, and it helps people get fair and fast access to credit when you need it. You can influence your FICO score in the same ways you can influence your credit scores with the 3 major credit reporting bureaus (TransUnion, Experian and Equifax) – that is, by paying bills on time, not carrying too much debt and making smart credit choices.
FICO scores range from 300 to 850. Every lender determines individually what is a good FICO Score and how they will use that FICO Score and other information in the loan approval process. Typically, the higher your score, the lower the risk and the more likely creditors are to lend to you. In general, most lenders find scores above 670 as indicating good creditworthiness.
A good FICO Score can save you thousands of dollars in interest and fees, as lenders are more likely to extend lower rates if you represent less risk for them. Over 90% of lenders use FICO scores when evaluating consumer credit worthiness.
For more information on FICO scores, reach out to a mortgage lender (we are happy to recommend some lenders we frequently work with) or check out myfico.com