Over 75% of credit applications in the United States use the FICO® score and most banks look at all of the three major credit bureau scores. You may have heard of them: Equifax, Experian, and TransUnion. There are other credit bureau scores in existence, however, FICO® scores are by far the most commonly used. In general, when people talk about “your score”, they are referring to your current FICO® score. Banks use this score in determining the risk associated with providing any individual credit. The lower the FICO® score, the higher the risk, and therefore, the higher the interest rate you are likely to pay to be rewarded credit. This goes for your credit cards, your mortgages, your car loans, etc. Therefore, it is in the best interest of all consumers to build a healthy credit profile. This will equate to hundreds, potentially thousands, of dollars saved on an annual basis! When considering a 30 year mortgage, this can mean tens, even hundreds, of thousands of dollars over the life of the loan.

In essence, your FICO® score is a numeric representation of your financial health and responsibility and ranges between 300 and 850. This is the measure that most lending financial institutions, such as credit card issuers, look at when evaluating your risk profile. It identifies your level of future credit risk. Banks vary individually on strategy and find different levels of risk acceptable. However, the methodology in arriving at such risk profiles from a mathematical standpoint is very consistent.

In order for a FICO® score to be calculated, your credit report must contain at least one account which has been open for at least six months, as well as one account that has been updated in the last six months. In other words, there must be adequate and recent information on which to base a score. This is why many banks offer Student-specific credit cards – providing an opportunity for young adults to begin the process of building their credit. Furthermore, your FICO® score changes over time as your data changes. Therefore, people with poor credit, or in “rebuilding” credit mode have the opportunity to improve their credit rating by changing their financial behaviors to more responsible patterns, e.g., paying bills on time.

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The national distribution of FICO® scores based on the % of population is as follows:

* Remember, the higher the score, the less risk, therefore the more attractive you are to lending institutions and the more likely you are to secure a lower interest rate and save money!

Generally speaking, a score of 660-700+ indicates a good credit risk. Anything above 750 puts you in the “excellent” credit standing category, and makes you extremely attractive to banks and other lending financial institutions. Between 620 and 660 is considered fair, while anything beneath 620 still leaves a chance for obtaining credit, but your chances are much slimmer and you are likely to be denied credit from several institutions that employ stiffer risk assessment criterion.


What goes into my FICO® score calculation?

Your FICO® score and similar scores are calculated from a lot of different credit data found in your credit report. The following provides a good benchmark of various categories measured and the different weights applied to each:

Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
Pursuit of New Credit – 10%
Types of Credit Used – 10%

The percentage breakdowns illustrate the importance of each of the categories for most Americans; however, some people, such as young adults and students, who have not been using credit long, may alter the importance of these categories by making the proper adjustments.

Your score is a complex mathematical equation designed to arrive at a financial snapshot or profile of you at any given time in your financial history.

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