Credit Card Insider is an independent, advertising supported website. Credit Card Insider receives compensation from some credit card issuers as advertisers. Advertiser relationships do not affect card ratings or our Editor’s Best Card Picks. Credit Card Insider has not reviewed all available credit card offers in the marketplace. Content is not provided or commissioned by any credit card issuers. Reasonable efforts are made to maintain accurate information, though all credit card information is presented without warranty. When you click on any ‘Apply Now’ button, the most up-to-date terms and conditions, rates, and fee information will be presented by the issuer. Credit Card Insider has partnered with CardRatings for our coverage of credit card products. Credit Card Insider and CardRatings may receive a commission from card issuers. A list of these issuers can be found on our Editorial Guidelines.
So you’ve heard the word “FICO” before.
Maybe from your mom, who’s always telling you to “stay on top of your FICO scores.”
Or maybe from your prospective landlord, who wants to “check your FICO” before he’ll let you live in his apartment.
But what does FICO stand for? And why is it so important?
Despite sounding mysterious, the acronym’s origins are pretty straightforward: FICO stands for Fair Isaac Corporation, a financial services company founded in 1956 by an engineer named Bill Fair and a mathematician named Earl Isaac.
The pair wanted to use data to help businesses make better decisions. It started using predictive analytics to create “credit scores” that would help businesses determine how much credit risk a potential borrower posed.
In 1958, it introduced its first credit scoring system, and in the late ’80s, it rolled out FICO credit scores.
FICO isn’t a credit reporting agency. Instead, it uses reports from the three major credit bureaus — Equifax, Experian, and TransUnion — to determine your FICO credit scores.
Lenders, in turn, use these scores to assess your level of credit risk: The higher your score, the less likely you are to default on a loan.
So, if your FICO scores are high, lenders will be eager to give you money, and will offer attractive interest rates. If your scores are low, they’ll be more wary, and may deny your application — or offer high interest rates to hedge their risk.
Though people often refer to “your FICO score” in the singular, you actually have dozens. Each is based on a single credit report from one of the credit bureaus.
They vary based on:
Though we’re focused on FICO scores for this article, they’re not the only credit score around. The three major credit bureaus introduced “VantageScore” back in 2006.
The main difference between FICO and VantageScore is the latter can be generated using just a month or two of credit history. With FICO scores, you usually need at least six months of history to generate a score.
Most lenders will check your FICO scores rather than VantageScores. But since they use similar credit scoring models, maintaining good FICO scores will also lead to good VantageScores.
FICO is rolling out a new type of score in 2019 called UltraFICO. This score takes into account data provided by consumers, like bank account information. Its aim is to help people with bad or limited credit histories boost their scores.
Your FICO scores aren’t set in stone. They change frequently, even from month to month, depending on your credit behavior.
Here’s a breakdown of what affects them:
This chart shows the criteria used to create FICO scores and their relative importance in your credit score.
Never used credit before? Then you probably don’t have FICO scores. FICO typically requires you to have six months of payment history before it’ll be able to generate your scores. Here’s how to build your credit file with credit cards.
Here are the FICO score ranges for FICO Score 8, according to myFICO.
|FICO Score Range||Credit Rating|
|579 or lower||Poor|
|800 or above||Exceptional|
In general, once you get into the upper end of the “Good” range, you can expect to be approved for most offers you apply for, although you won’t always get the best possible rates. While there isn’t a special prize for having credit scores above 800 or a perfect score of 850, a high score can provide a nice cushion in case your score falls.
You should also be aware that credit card issuers base approval decisions on more than just one of your credit scores. Even if you have great FICO scores, for example, a financial institution may deny you for certain items on your credit reports or your income.
Now that you know what FICO stands for, you’re probably eager to see your scores.
The easiest way to view a free FICO score is through the Discover Credit Scorecard. This tool is available to anyone, whether you have a Discover credit card or not. Discover cardholders will see FICO scores based on their TransUnion reports, while non-cardholders will see scores based on their Experian reports.
For several other strategies, read this post on getting your free credit scores (FICO included).
You should also take the time to check your credit reports. Since FICO bases your scores on these reports, it’s vital they’re correct. If you find any mistakes or errors, contact the credit bureau immediately.
Though credit scores might not seem like an exciting topic, they’re extraordinarily important for your financial well-being.
And FICO scores, in particular, matter: 90% of “top lenders” use them to make lending decisions.
Those lending decisions go beyond whether or not you’ll receive a shiny new credit card. They affect all areas of your life, including your ability to get a job or an apartment, and the interest rates you’ll pay on an auto loan or mortgage.
So it’s vital you stay on top of your scores. If you want to improve your FICO scores, here are a few steps you should follow:
When you have excellent FICO scores, you can snag the best interest rates and the best credit cards. When you have bad credit scores, you may have trouble getting a landlord to lease you an apartment.
So, if you think about it, FICO stands for much more than just a credit score — it stands for financial opportunity.
FICO stands for Fair Isaac Corporation, a company that helped pioneer the modern-day credit score. Though there are other scoring brands, FICO’s scoring models are the most prominent in the nation, and they’re used by lenders around the world to help measure how much risk prospective borrowers present.
Credit Card Insider receives compensation from advertisers whose products may be mentioned on this page. Advertiser relationships do not affect card evaluations. Advertising partners do not edit or endorse our editorial content. Content is accurate to the best of our knowledge when it's published. Learn more in our Editorial Guidelines.
Do you have a correction, tip, or suggestion for a new post? Contact us here.
The responses below are not provided or commissioned by bank advertisers. Responses have not been reviewed, approved or otherwise endorsed by bank advertisers. It is not the bank advertisers' responsibility to ensure all posts are accurate and/or questions are answered.