FICO – it's an acronym you hear and read a lot about, but do you know what it means? Fair Isaac Corporation (“FICO®”), is a data analytics company founded in 1956, and is focused on consumer credit score analytics.
Based on what we know, FICO weights certain criteria differently, including:
- 35% Payment history
- 30% Amount owed
- 15% Length of history
- 10% New credit
- 10% Types of credit used
Here's the important thing to remember – your credit report is different from your credit score.
What's a Credit Report?
Your credit report shows how well you repay each of your debt obligations, while your credit score estimates your creditworthiness with one numerical value.
A credit report includes information about your past and existing credit agreements, such as credit card accounts, mortgages, and student loans, and lists “inquiries” about your credit history. It outlines how much you owe creditors, how long each account has been open, and how consistently you make on-time payments. Credit reports also list related public records, such as collections or court judgments against you, tax liens on your property, or bankruptcy filings.
What's a Credit Score?
A credit score is best thought of as a grade given to your specific credit report.
There are three different credit reporting agencies – Equifax, Experian, and Transunion – each of which assigns you a credit score. When you request your credit score, you will actually receive three numbers in return, and since the numbers will be coming from different reporting agencies, they may all be different.
Lenders typically assign interest rates based on what bucket your credit score falls into. Insurance companies, landlords, mortgage lenders, and even potential employers now review your credit score as a benchmark for figuring out how responsible you are.
The most widely used score, FICO, ranges from 300 to 850. On the FICO scale, the higher the number, the better.
How Can I Access my Credit Report and Credit Score?
The Fair Credit Reporting Act (“FCRA”) allows consumers access to one free credit report annually from each of the three credit reporting agencies. The free annual credit report will not contain your credit score. To access your credit score for a fee, you can contact the credit reporting agencies or visit annualcreditreport.com. There are also credit monitoring services available for a fee that can provide this information for you. Many banks and credit card companies now provide credit scores to their customers.
By understanding your credit report and credit score – and checking them regularly – you can make informed choices that will impact your financial future.
Generally, a credit score over 740 is considered excellent. If your score is below 650, you may see higher interest rates for loans and credit cards and should consider taking steps to improve your credit.
Reach out to [email protected] or call 833-600-0490 (toll free) if you have any questions on your credit report and how it impacts your mortgage.