FICO score and credit score are two common terms often used interchangeably to describe a person’s credit health. However, they don't refer to the same thing. A Fair Isaac Corporation (FICO) score is a model used to calculate credit scores. Like other types of credit scores, FICO reveals a customer's creditworthiness and the credit risk they pose to a potential lender.
What is a FICO Score?
FICO is a type of credit score developed by Fair Isaac Corporation in 1989. Since then, it has become one of the lenders' most popular credit scoring models. Approximately 90% of loan providers use FICO.
Different lenders use different FICO score versions, but the latest is the FICO Score 10 model. The corporation releases new models every year to accommodate changes in the marketplace. For instance, the updated FICO 10 model regards debt borrowed within the last two years more heavily than any other type of debt.
Your FICO score directs what financial products and forms of credit you can acquire. Your credit score can also extend to other aspects of life. For instance, landlords and employers use it to review potential tenants or employees.
FICO score focuses on a different aspect of data in a credit report. These aspects include:
- Amounts owed (30%)
- Payment history (35%)
- New credit (10%)
- Length of credit history (15%)
- Credit mix (10%)
An exceptional FICO score indicates that you will more likely get approved for the financial loans you might apply for. You can get the lowest interest rates and the best terms with an exceptional score. On the other hand, having a poor FICO score means you are less likely to get approved. This is because the loan will come with a higher interest rate with stringent loan terms if you get approved.
What is a Good FICO Score?
Typically, a FICO score above 670 is considered a good credit score. However, this varies from lender to lender. The standard model classifies individual's scores into these categories:
- Poor: 579 and less
- Fair: 580-669
- Good: 670-739
- Very good: 740-799
- Exceptional: 800 and above
An exceptional FICO score indicates that you will more likely get approved for the financial loans you might apply for. You can get the lowest interest rates and the best terms with an exceptional score. On the other hand, having a poor FICO score means you are less likely to get approved. This is because the loan will come with a higher interest rate with stringent loan terms, if you get approved.
Contact our New York Credit Attorneys
Sometimes your credit report may bear false information that can affect your credit rating. If that's the case, reach out to a New York credit attorney from Mizrahi Kroub LLP. We can help you correct these errors to ensure you access loans easily.
