What Is a FICO Score?
A FICO score is the most widely used credit scoring model in the United States, developed by the Fair Isaac Corporation. Ranging from 300 to 850, this three-digit number helps lenders evaluate a borrower’s credit risk. The score is calculated using five key factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%). A higher FICO score indicates lower risk, making it easier to qualify for loans, credit cards, and better interest rates.
Why Your FICO Score Matters
Your FICO score plays a critical role in financial decisions beyond borrowing. Landlords may check it when reviewing rental applications, and some employers use it to assess job candidates’ reliability. Even utility companies and insurers may consider it when setting rates. A strong FICO score can save you thousands of dollars over time through lower interest rates and better terms. Monitoring your score regularly and addressing any discrepancies ensures you maintain good financial health.
Understanding and managing your FICO score is essential for long-term financial success. By practicing responsible credit habits—like paying bills on time and keeping balances low—you can build and maintain a high score, unlocking better financial opportunities.