FICO Score

FICO Score

What is FICO Score?

FICO (Fair Isaac Corporation) is a type of credit score through which it is decided whether you are capable of paying borrowed amount or not. It is a three-digit score through lenders and banks decide to give you credit.

FICO score range in 300-850.

< 580 Poor
580-669 Fair
670-739 Good
740-799 Very Good
800+ Excellent

Through FICO scores it is also decided how much you can borrow for how many months and how much interest it will cost. FICO score is a summary of your credit report. The lender will look at your score and decide whether they will lend you money or not it helps lenders to make smarter, quicker decisions.

How it is calculated?

FICO score is based on five factors: Payment History, Accounts Owed, Length of Credit History, New Credit and Mix Credit.

FICO Score

  • Payment History (35%)
  • Account Owed (30%)
  • Length of Credit History (15%)
  • New Credit (10%)
  • Mix Credit (10%)
Payment History:

It is 35% of the FICO score. It determines whether the person has paid his credit on time or not.

Accounts Owed:

It is 30 % of the FICO score. It determines how much credit an individual owes i.e. how much money he has to pay. The ratio of money owed to the amount of credit available is what FICO consider.

Length of Credit History:

It is 15% of the FICO score. The older you have credit account is, the better your score. In a general way, it is how longer your credit is.

New Credit:

It is 10% of credit score. New credit means newly opened accounts. If you have opened new accounts in a short period it results in a bad score.

Credit Mix:

It is 10% of credit score. Credit mix has a variety of accounts. For high credit scores, you should have a strong mix of retail accounts, credit cards, and instalment loans such as signature loans or vehicle loans.

How to improve your FICO Score

  • Pay bills on time
  • Reduce the amount you owe
  • Don’t open a lot of new credit accounts in a short period.
  • Manage your credit cards timely
  • Apply and open new credit accounts if you need them
  • Don’t keep high outstanding balance on credit cards
  • Remember that accounts are checked off the last 7 years so don’t close your accounts for good credit.