FICO Credit Scores

If you've ever spoken to a creditor or lender, they may have referred to your FICO® credit score or simply your FICO score.  That's because lenders have several ways of evaluating your credit risk, and your FICO score is one of the primary tools used by these financial institutions.

What is a FICO Score?

Your FICO score is nothing more than a reference to a credit score that was developed using the Fair Isaac credit scoring model.  Scores are published by each of the three major credit reporting agencies.  The FICO model calculates credit scores based on information along five dimensions:

• Payment History (35% of FICO score) - account payment information with such agencies as credit card companies, lenders of installment loans, mortgages, and retailers.  This part of your credit score measures your ability to pay on time, and the money you have past due.
• Amounts Owed (30% of FICO score) - information concerning the total amount of credit you have outstanding, number of accounts, balances on account, and how much credit you have relative to the maximum amount creditors are willing to extend to you.
• Length of Credit History (15% of FICO score) - this dimension measures how long your accounts have been open with creditors and lenders.  The longer your credit history, the easier it is to accurately identify payment patterns.
• New Credit (10% of FICO score) - this information is used to calculate your credit score, and reflects how much credit you've applied for lately.
• Types of Credit (10% of FICO score) - this is the diversity of credit you have in your portfolio.  For example, do you have a mortgage, car loan, and credit cards?  The more types of credit you have, the more accurately your score can be determined.

FICO Score Calculators

If you're looking for a FICO score calculator, you may be disappointed to learn that you won't find a calculator that provides you with a numerical value - and that's probably what you're looking for.  Fair Isaac uses a complex and proprietary algorithm, or calculation, to develop their score.

We have as many credit calculators as any other website, but you won't find a FICO score calculator here for that very reason.  Anyone claiming to have an actual FICO calculator is simply misleading you.

Free FICO Scores

For the same reasons that you won't find a calculator, it's also not possible to find free FICO scores online either.  Once again, anyone claiming to offer you a free FICO score is misleading you.  Legitimate offers of FICO credit scores should run you around $15, and that is for just one of the three credit reporting agencies.

In fact, a bundle of credit scores from all three credit agencies will run you around $45, while the ability to monitor your score will cost around $12 per month.  This is arguably a good value, but not exactly a free score.

Good, Bad, and Average FICO Scores

Figuring out if your FICO score is good, bad, or average is not as simple as it sounds.  For argument's sake, we can define a good FICO score as any score that is above the national average score.  The same rationale can be used to define a bad FICO score as any score below the average FICO score.

Right now (December 2011), the national average credit score is right around 692.  But an average credit score varies considerably by state.  If you're interested in a breakdown of credit scores by state, we have those statistics in our article on National Average Credit Scores.

Unfortunately, an average can sometimes be misleading because it doesn't tell you anything about the "distribution" of FICO scores.  The FICO score chart below gives you a distribution of the national scores.

Table of FICO Credit Scores

FICO Scoring Example

What this table helps you to understand is the percentage of the national population with credit scores in the ranges indicated.  From this table you know that 27% of the population has a credit score between 750 and 799. You also know that 58% of the population has a credit score above 700. 

Raising Your FICO Score

If your FICO credit score is lower than you'd like it to be, there are some simple steps you can take to raise, or improve, your FICO score.  If you understand the elements discussed above, the components of the score then increasing your FICO score should be somewhat intuitive.  For example, here is a short list of steps you can take to improve your score:

• Make your payments to creditors on time, and pay the full amount owed.
• Try not to max-out your lines of credit with all your creditors.  In other words, just because a credit card company extends you $5,000 in credit, that doesn't mean you have to use all $5,000 in credit.
• Don't be afraid to open new accounts, especially if you're just entering the workforce.   For example, college students shouldn't be afraid to open credit card accounts because the sooner they're opened, the more credit history you've generated.
• Don't apply for all the credit cards you want at the same time.  Your FICO score will suffer if it looks like you're scrambling to get credit from everyone in a short timeframe.
• Diversify your credit by owning car loans, mortgages, and credit cards.  The more information a creditor has on your account, the better.

Of course all of these tips dealing with raising your credit score assume that you're responsibly paying back your creditors, and not overextending yourself financially.

Repairing Credit Scores

While it is possible to raise the score appearing on your credit report over time, there are very few actions you can take to repair your FICO credit score in the short term.  No doubt there are many organizations offering credit repair services, but there are legal limits as to what you can actually do to repair credit.

If a credit repair offer sounds too good to be true, then it probably is too good to be true.   If you've been denied credit recently, then you're entitled to a free copy of your credit report.  One of the most important actions you can take to repair your credit score is to make sure there are no errors on that report.  This is especially true if you think you've been wrongfully denied credit.

Finally, if you believe that errors on your credit report are hurting your FICO credit score, and you want to take steps to correct your report, then you may want to take a look at our article on Fair Credit Reporting Act.  In that article, you'll find the exact steps you can take to repair your report, as well as the contact information for each of the three credit reporting agencies.

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