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A FICO® Score☉ is a metric lenders look at to determine whether you're likely to pay them back. Your financial history—including how often you pay bills on time and how much debt you have—appears on your credit report, and that information makes up your credit score.
You have many credit scores, including specialized versions of FICO® Scores tailored to specific industries. But the FICO® Score 8 is the most commonly used. It's a three-digit number from 300 to 850, and the average score is around 700. The higher your score, the more favorable interest rates you'll get from lenders, making it cheaper to borrow money.
Here's what you need to know about what a FICO® Score is, how it's used, and how to check yours so you can get it in the best shape possible.
What Is Considered a Good FICO® Score?
A good FICO® Score starts at 670. If your score is above 740, you can generally expect lenders to offer you better-than-average interest rates. As you move closer to the top score of 850, you'll more likely qualify for the lowest interest rates and the most premium credit card offers.
On the flip side, a score of 570 to 669 is considered fair, while 300 to 569 is considered poor. You can still qualify for loans and credit cards with a lower FICO® Score, but you may be required to pay higher interest rates, make a bigger down payment or pay additional fees. Even landlords may require a credit check before they will rent you an apartment. So a lower credit score could put you at risk for securing a place.
Why Do I Have Different FICO® Scores?
FICO, which stands for the Fair Isaac Corporation, regularly updates the formula it uses to calculate FICO® Scores.
Currently, most lenders use the FICO® Score 8 formula. But there is a newer version, for instance, called the FICO® Score 9, which isn't yet widely adopted. The FICO® Score 9 reduces the impact of medical debt on your score and will add in rental payments to credit reports when landlords choose to report this information. That may help people without much credit history build a credit file.
Additionally, there are FICO® Scores geared toward different industries, such as auto lending, mortgage lending and credit card issuing. These measure and weight your financial information in slightly different ways.
Finally, you may see different FICO® Scores depending on the credit bureau—Experian, TransUnion or Equifax—your lender pulls your score from. The bureaus may receive information from your creditors at different times over the course of a month, which affects, for instance, the amount of credit they'll report you're using, and thus your credit score. A lender may request credit scores from multiple bureaus for that reason.
How Are FICO® Scores Calculated?
Your FICO® Scores are based on five main factors.
- Payment history: Your payment history accounts for 35% of your FICO® Score, the largest share. It's your track record of making payments on credit cards and loans. Paying all your bills on time is one of the best ways to improve your credit scores.
- Credit utilization: This accounts for about 30% of your FICO® Score. It's based on how much of the available credit on revolving credit lines, primarily credit cards, you're using. Experts say it's best to use no more than 30% of your credit at any point in the month, and for the best scores, stay under 6%. Calculate your credit utilization rate by dividing your total outstanding credit card balances by your total credit limits.
- Length of credit history: This accounts for about 15% of your FICO® Score. It refers to the amount of time you have had credit accounts open, and how recently you've used an account. A longer history is a plus.
- Credit mix: Your credit mix makes up about 10% of your FICO® Score. Credit mix means having different types of credit accounts, such as credit cards, a car loan and a mortgage. Having a wide range of accounts plays a small role in determining your FICO® Scores.
- New credit: New credit makes up about 10% of your score. Lenders typically consider it a red flag if you open up several new credit card accounts or take out new loans in a short period of time. It can signal you may be taking on too much debt and can't be relied on to repay debts on time.
How Is FICO Different From VantageScore?
Aside from FICO, there's an entirely separate credit scoring model, called the VantageScore®, which the three major credit reporting agencies released together in 2006. The average VantageScore, according to recent Experian data, is 680.
There are several differences between the FICO and VantageScore models. You could have a VantageScore with just one line of credit to your name, even if it's less than six months old, for instance. But you won't have a FICO® Score if you don't. Plus, a good VantageScore starts at 700, as opposed to 670 on the FICO® Score range.
The two scoring models also differ in the ways they weight certain financial behaviors. The latest VantageScore version is more similar to FICO® Score 9 than FICO® Score 8, which is still most widely used: It doesn't factor in paid collection accounts and reduces the impact of medical collections on credit scores. VantageScore also considers your historical credit utilization, such as how frequently you pay off your balances in full, rather than capturing it only as a snapshot like a FICO® Score does.
Where Can I Get My FICO® Score?
Lots of credit card issuers and banks offer customers free FICO® Scores each month. It may be included on your billing statement, or you may be able to log in to your account to get your most recent score.
If you don't have a financial account with access to a free FICO® Score, you can also receive one at no cost based on your Experian credit report by registering for an account on Experian's site.
How to Improve Your Credit Score
You can take steps to improve your credit score, such as setting up automatic bill pay so you make all monthly payments on time. You may find it makes sense to spend time strengthening your FICO® Scores before you apply for a loan or credit card.
As a first step, consider pulling your free credit report to make sure all the information included, which contributes to your score, is accurate and up to date. You'll also be able to assess which areas of your credit history, such as your debt balances or length of history, would benefit from some extra attention.