The Fair Isaac Corporation, or more commonly known as FICO, is an organization that works with data and predictive analytics and focuses predominantly on credit scoring services. The company is also responsible for the development of the credit score that bears its name. 

The FICO credit score works by taking a look at a range of credit information and uses it to create a score that helps lenders and other financial institutions determine and predict the behavior of that person in terms of handling a credit line. The FICO score is also used to forecast which accounts are the likeliest to end up bankrupt as well as which will be the most profitable, among other such things. 

Since FICO is not a credit reporting company, it uses information provided by the three major credit reporting agencies in the US to create their credit scores. These agencies are Equifax, Experian, and TransUnion. 

What Makes up a FICO Score?

The FICO score is based on a complex mathematical formula. Five main factors go into the score, each of which having a varying degree of influence on the final score. These are as follows:

  • Payment History35% of the total FICO score – It refers to whether an individual pays their credit on time. Credit reports show the payments submitted for each line of credit as well as if they were 30, 60, 90, or 120 days late.  
  • Accounts Owed30% – This represents the total amount of money a person owes but also frames it from the perspective of their credit limit. So, if a person owes a relatively modest amount, say $8,000, but their lines of credit are fully extended, and their credit cards are maxed out, this will be much worse than a person owing $150,000 but not being close to the limit on any account. 
  • Age of Credit History15% – In general, this takes into account the length of time a person has had credit. And the longer, the better it is. It looks at how long the oldest account has been open, the age of the newest account, and the overall average. Of course, it doesn’t mean that someone with a short credit history can’t have a good FICO score.  
  • New Credit and Inquiries10% – Every time a person opens a new account or goes for a so-called hard inquiry – where a lender requests the borrower’s full credit report – points will deduct from that person’s score. If someone opens or tries to open too many accounts in a short time, it’s indicative of a higher degree of risk. 
  • Credit Mix10% – This portion of the FICO score looks at the variety of accounts a person has. For a high credit score, people should try to aim for a variety of retail accounts, installment loans, mortgages, credit cards, etc.instead of getting multiple credit cards, for instance.

All of these factors are taken into consideration when compiling a person’s overall credit score. However, the weight of some of these categories may vary, depending on the individual. If, for instance, a person hasn’t been using their credit for very long, the information will be factored in slightly differently from a person with a long credit history. It’s for this reason why people should focus less on their overall credit score and, instead, try to figure out which areas need more work to improve their total FICO score. 

What Doesn’t Make up a FICO Score? 

While there indeed is more information about any individual circulating out there, FICO does not consider anything that doesn’t appear on your credit report. Among these, we can include the following:

  • Personal Information – age, sex, religion, race, national origin, marital status, etc.
  • Employment Information – occupation, title, employer, employment history, salary, etc.
  • Taking part in various credit counseling programs 
  • Where you live 
  • The interest rates on your credit accounts 
  • Soft Inquiries – Unlike the hard inquiries we mentioned above, soft inquiries do not affect your score. These occur whenever an individual checks their credit report or score 
  • Any other type of information that doesn’t help in predicting your future credit performance 

The FICO Score Range

The FICO score is generally within a 300 to 850 point range, where a higher number is representing less risk for a lender or insurer. A FICO score of 670 or above is seen as good credit, while a score above 800 views as exceptional. People with a 760-point FICO score, or higher, will have a much better time borrowing at low-interest rates, as well as have access to different insurance discounts and other privileges. 

There are a total of five FICO Score Ranges, going from very poor to exceptional. These are as follows:

  • Very Poor300 to 579 Credit Score – People within this category represent roughly 17% of the population with a credit history. This category of applicants will often be required to pay a fee or deposit whenever they open a credit account or can be refused altogether. 
  • Fair – 580 to 669 Credit Score – About 20% of people fall within this category and are considered to be subprime borrowers. 
  • Good – 670 to 739 Credit Score – It represents about 21.5% of the population, and only 8% of them will be likely to become seriously delinquent in the future. 
  • Very Good – 740 to 799 Credit Score – Roughly 18.2% are within this range and will usually receive better than average rates from lenders.
  • Exceptional – 800 to 850 Credit Score – Some 19.9% of people are in this range and are at the top of the list for the best available rates. 

We should also mention that there are people with no credit rating whatsoever. These include underage people as well as those who don’t have a credit account open for at least six months or one that has only reported to credit agencies in the past six months.

When comparing people with no credit and those with very poor or fair credit, there aren’t many differences. Nevertheless, those with no credit do usually come up on top since they are given the benefit of the doubt, as opposed to those with poor credit who’ve already shown that they have trouble managing their finances. 

There Are More Than One FICO Scores

It’s also important to know that there are more than one FICO score models. There are dozens of different models, depending on what type of credit you are applying for. It means that if you are applying for a car loan, the actual formula used to calculate your FICO score will be slightly different than when applying for a mortgage and the resulting score may be different. 

Besides, each of the three major credit companies (Equifax, Experian, and TransUnion) generates their ratings. When going for a soft inquiry, it’s best to request all three as they may vary slightly. Lastly, there is also a FICO score that’s aimed at small businesses. It is called FICO Small Business Scoring Service (SBSS) and works much the same as the individual FICO but in a range of 0 to 300. 


In short, your FICO score will impact the likelihood of you getting approved for credit as well as the interest rates and other bonuses that you may receive. But by practicing fiscal discipline, everyone can improve their score to take advantage of the benefits that follow.