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What is a FICO score?

The FICO score is the credit score created by Fair Isaac Corporation, also known as FICO. FICO score is often checked by lenders in order to assess a borrower’s credit history. There are several areas that are taken into account for the FICO score - payment history, credit history length, present levels of indebtedness, the kinds of credits that have been used, and new accounts of credit. FICO score plays an important role in the assessment of credit risks. 

FICO: An introduction

Fair Isaac Corporation, also known as FICO, is an analytical software company which gives services and products to individual consumers as well as businesses. FICO is a major company which is widely known for its production of consumer’s credit scores which are largely used by various financial institutions in order to make a decision on whether or not to lend money.

The FICO credit score ranges between roughly 300 and 850. The range between 670 to 739 is considered to be a ‘good’ FICO credit score. It is considered by various lenders to be a favourable credit score. A FICO credit score of 580 to 669 would rather be difficult in terms of obtaining financial help. The creditworthiness of a borrower is determined by the lender by looking at the FICO credit score along with other important details and records such as their income, tenure of their current job, the kind of credit that has been requested, and so on.

FICO Score Calculations

FICO score has different categories for different individuals, which comes with a varied range of weightage. On the basis of these weightages as well as categories, FICO scores are determined. Generally, payment history is roughly 35% of the credit score, the length of the credit history tends to be 15%, 10% is the new credit, and so is the credit mix. The accounts owed amount is usually a total of 30%.

What is Payment History?

FICO score payment history is a record of whether or not an individual is paying the credit accounts within the fixed time. These reports show in detail the payments that are submitted for every line of credit. The payment history also notes details of bankruptcy, late payments as well as missed payments.

What are Accounts Owed?

It means the total amount that a person owes. However, it is important to note that a large amount of debt cannot be equated to low FICO credit score. In case of FICO, interestingly, the availability of credit is equated to the ratio of owed money.

What is a Credit History Length?

The credit score of any and all individuals depends on the span of time that they have had credit. However, there are cases or instances where an individual with a very short credit history has also had a very good credit score. FICO particularly focuses on the credit history length while setting the FICO credit score of individuals. It takes into account the tenure of the oldest of all accounts, and the tenure of the most recent, while calculating an overall average.

What is a Credit Mix?

The varied range of accounts is called the credit mix. An individual requires a heavy mix of varied retail accounts and credit cards along with signature loans, mortgages or any kind of vehicle loan in order to obtain higher levels of FICO credit score.

What is a New Credit?

A new credit is nothing but the accounts that have been opened recently. The FICO score of an individual would be lowered if they have opened multiple new accounts within a very short span of time.

Versions of FICO

There are different versions of FICO. The various versions have come to exist due to the periodic updates of calculation methods in the FICO company. It has updated its methods since the first method of scoring that was introduced in the year 1989.

What is a FICO Score 8?

FICO Score 8 is the most popular version of FICO that is used. FICO states that FICO Score 8 is a system that is similar to every previously made version, and has added features which make it a much better and predictive scoring version that the rest.

The FICO Score 8 is basically similar to every other system, and tries to portray the responsibility and effectiveness of different individual borrowers in terms of their interaction with the debt.


FICO credit score becomes important while applying for a personal loan. So, do make it a point to keep a check on your FICO credit score.

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