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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The following post has been sponsored by our partner, FICO. The analysis and opinions in the story are our own and may not reflect the views of FICO. When lenders want to assess your credit risk, one of the important pieces of information considered is your —or the three-digit signifier of a person’s creditworthiness. There are a few different types of credit scores, but two known scoring models are FICO Score and VantageScore. What is a FICO Score
FICO is named for Fair Isaac Corporation, the analytics company that introduced the flagship credit scoring model in 1989. It’s not uncommon for consumers to think FICO Score is synonymous with a credit score, given FICO Scores are used in more than 90 percent of lending decisions. However, there are different types of credit scores (more than 1,000, in fact), and not all credit scores are FICO Scores. Due to the fact that there’s a wide variety of data to analyze and choose from depending on credit type when calculating credit scores, one consumer could have several FICO Scores (which lenders might use to evaluate, depending on the type of loan or credit you’re seeking). FICO s credit score formula
The all-industry FICO Score ranges from 300 to 850, and the higher the score, the more attractive you are to lenders as it indicates higher odds of repayment. Here’s a look at the FICO Score ranges, according to : Poor credit: 580 and under Fair credit: 580 to 669 Good credit: 670 to 739 Very good credit: 740 to 799 Excellent credit: 800 and up Below are the five categories, weighted according to importance, that help make up a FICO Score: Payment history 35 percent
The largest chunk of your FICO Score (35 percent) is based on payment history, and a solid reputation for making your payments on time each month—such as credit card bills and mortgage loan payments—is ideal. Any instances of bankruptcies, liens, repossessions, foreclosures or late payments may adversely affect your score. Amounts owed 30 percent
Thirty percent of your FICO Score is based on the amounts you owe, also commonly referred to as. It’s not a bad thing to have several credit accounts open at once, but owing too much money across various accounts could have a negative impact on your score. As a rule of thumb, try to keep your credit utilization ratio (or the amount of total credit being used) under 30 percent. If you can, using as little as 10 percent of your credit line can be greatly beneficial to your score (though this may not be possible depending on your spending needs and credit limit). Length of credit history 15 percent
The length of your credit history accounts for 15 percent of your FICO Score and considers the age of your credit accounts, the activity level of these accounts and more. Note, FICO also factors in the average age of your accounts and the age of the oldest account you own. Knowing this, it’s important to think twice before closing accounts—such as you no longer find a use for. Keeping a semi-dormant credit card account open, for example, and making small purchases (and subsequent payments) each month can strengthen your FICO Score. Credit mix 10 percent
Ten percent of your FICO Score is based on your credit mix or the variety of loans you own. Having a well-rounded mix of loans can signal to lenders you’re able to manage different types of credit (think: mortgages, credit cards and installment payments) and can have a salutary effect on your score, but note it’s not mandatory to own each type of available loan. New credit 10 percent
The last 10 percent of your FICO Score is made up of recent searches for credit. In order to keep your new credit in check, refrain from applying for more than one loan at a time. Too many from lenders in a short period of time, for example, could indicate a risky borrower and impact your credit score. Note, however, your score won’t be affected by simply shopping for a loan across multiple lenders. FICO Score and other credit scoring models
Another known credit score model is VantageScore, which was developed in 2006 and is owned by the : Equifax, Experian and TransUnion. While most credit scoring models consider the same general information when calculating your score, there are a few main differences between a FICO Score and VantageScore. Firstly, FICO uses anonymized consumer financial data compiled by each of the three major credit bureaus and provides three bureau-specific scores. VantageScore uses a single model across all three credit bureaus to produce a credit score based on consumer financial data. Given the differing consumer credit reporting bureaus and data, it’s important to note your credit scores may differ—and most likely does—across each credit bureau. What score matters most to your lender
According to leading financial industry analyst Mercator, FICO Scores are used in over 90 percent of credit lending decisions in the United States—but that doesn’t mean your lender is guaranteed to evaluate just your credit score to approve you for a loan. Lenders use a variety of information and tools in addition to credit scores when evaluating your creditworthiness. It is important to track your credit score, understand the different versions available and confirm which one your lender is using for your application to prevent any surprises. FICO, in particular, offers a range of scores depending on the type of loan you’re requesting (for example, applying for a credit card versus a car loan). This helps ensure lenders accurately evaluate your creditworthiness, in turn providing you with the line of credit you require. You can learn more about these scoring variants on myFICO’s FICO Score Versions page. How to access your FICO credit score
There are a few ways you can , namely authorized FICO Score retailers, such as Equifax, Experian and myFICO. Also, you can access your score for free through FICO Score Open Access credit and financial counseling partners and the FICO Score Open Access lender partners. FICO Score Open Access Program
The FICO Score Open Access Program, offered by credit counseling partners and lender partners, was developed so that partners may share FICO Scores for use in credit counseling/education and lender evaluation scenarios for free with consumers. According to FICO, over 200 financial organizations take part in this program, which effectively grants consumers free access to their FICO Scores, including a breakdown of elements that affect your credit score. Why it s important to keep track of your credit score
When it comes down to it, regularly checking your credit score is key to overall financial health and ensures you know where you stand when applying for new lines of credit. Additionally, any sudden movements in your credit score may indicate inaccurate reporting or potential fraud, allowing you to and reverse it. Learn more about where to access your credit score for free by reading . SHARE: Claire Dickey is a product editor for Bankrate, and . Before joining Bankrate, Claire worked as a copywriter for brands within the telecommunications industry as well as a hybrid marketing and content writer. Related Articles