FICO Score

What it is

A FICO score is a three-digit credit score (range 300–850) developed by Fair Isaac Corporation that lenders use to evaluate a borrower’s creditworthiness. Higher scores indicate lower credit risk. FICO scores are widely used in U.S. lending decisions, including the majority of mortgage approvals.

How it’s calculated

FICO bases scores on information in your credit report, weighing five broad categories:

• Payment history — 35%
• On-time payments and absence of bankruptcies, collections, or delinquencies matter most.
• Amounts owed (credit utilization) — 30%
• FICO looks at the ratio of balances to available credit. Keeping utilization well below 30% is ideal.
• Length of credit history — 15%
• Longer histories generally help; FICO considers age of oldest and newest accounts and the average account age.
• New credit — 10%
• Recent account openings and multiple recent inquiries can lower scores.
• Credit mix — 10%
• A mix of installment loans, credit cards, mortgages, and retail accounts can be beneficial.

Example: Owing $10,000 on maxed-out cards can be worse for a score than owing $100,000 on accounts far below their limits, because utilization is a key factor.

Score ranges and what they mean

• 300–579: Poor — likely to face difficulty obtaining credit or will pay high rates.
• 580–669: Fair — may have trouble getting attractive financing.
• 670–739: Good — generally favorable to lenders.
• 740–799: Very good — should qualify for better rates.
• 800–850: Exceptional — access to the best rates and terms.

How to improve your FICO score

Practical steps that typically raise a FICO score:

• Pay all bills on time — payment history is the largest factor.
• Lower credit utilization — aim for under 30%, and lower if possible.
• Avoid opening many new accounts in a short time.
• Keep older accounts open to preserve credit history length.
• Maintain a diverse mix of credit types only if useful and manageable.
• Review credit reports regularly and dispute errors (you’re entitled to free reports annually from major bureaus).

Versions of FICO

FICO has released multiple scoring models since 1989; lenders choose which version to use. Notable points:

• FICO Score 8 is widely used and more forgiving of isolated late payments while more sensitive to high utilization on specific cards.
• FICO Score 9 reduces the impact of certain medical collection accounts and is more sensitive to rental history.
• FICO Score 10 and 10T incorporate trended data (how balances change over time), which can alter scoring outcomes.
• Older versions such as FICO 5 remain in use in some markets (for example, auto lending).

FICO vs. VantageScore

VantageScore is an alternative scoring model jointly created by the three major credit bureaus. Both use a 300–850 scale and similar factors, but they weight elements differently and have different requirements for when a score can be generated (FICO typically requires a tradeline older than six months with recent activity; VantageScore can score with a single tradeline of any age). Your VantageScore and FICO score can therefore differ.

Use in mortgage lending and other decisions

Mortgage lenders commonly rely on specific FICO versions (for example, FICO 2, 4, or 5) and consider scores alongside income, assets, employment history, and other underwriting factors. Some lenders set minimum FICO thresholds for approval; being just below a lender’s cutoff can affect eligibility.

How often scores update

Scores change as creditors report activity to the credit bureaus. For most consumers, a FICO score can update roughly once a month, but the timing depends on each lender’s reporting schedule and how many accounts you have.

Bottom line

The FICO score is a primary tool lenders use to assess credit risk. You can influence your score by managing payment history, credit utilization, account mix, and new credit activity. Regularly checking your credit reports and correcting errors helps ensure the score reflects accurate information.