What is a FICO score?

In This Article:

Key takeaways

  • FICO scores are a type of credit score widely used by lenders.

  • Your FICO score is calculated based on the information in your credit history.

  • A good FICO score can help you qualify for lower interest rates and better loan terms.

Your credit score affects everything from whether your next credit card application gets accepted to how much interest you’ll pay on your mortgage. There are different types of credit scores, but when people talk about scoring models, they usually mean FICO scores.

To get a handle on your credit, it’s important to know what a FICO score is, how it’s calculated and what counts as a good score. When you understand what goes into your most common credit score, you can learn strategies for improving it.

What FICO scores are

FICO scores are the most widely used credit scores. According to the Fair Isaac Corporation (FICO), these scores are used by 90 percent of top lenders to make credit-related decisions. That means that when you apply for a credit card, mortgage or personal loan, the lender will likely check your FICO score.

A good FICO score shows lenders that you’re a responsible borrower who can be trusted to repay debts on time. That can lead to lower interest rates, more favorable loan terms and even better credit card rewards.

FICO score ranges

FICO scores range from 300 to 850. Within that range, scores are classified into five categories: excellent, very good, good, fair and poor.

800-850: Excellent credit score

People with FICO scores between 800 and 850 have near-perfect credit. Earning an excellent credit score shows lenders that you’re a very responsible borrower. Lenders are more likely to offer you favorable loan terms and interest rates. According to the Experian, 21.9 percent of American consumers are in this category.

740-799: Very good credit score

People with FICO scores between 740 and 799 have above-average credit. If you’re among the 28.1 percent of American consumers with a very good credit score, you’re eligible for nearly all of today’s best credit cards. You can also look forward to lower interest rates on loans and mortgages.

670-739: Good credit score

People with FICO scores between 670 and 739 — which includes 21.6 percent of American consumers — have good credit. A score in this range proves to lenders that you can manage debt responsibly. Lenders will likely accept credit card or loan applications from borrowers in this range, but you may not qualify for the best interest rates and terms.

580-669: Fair credit score

People with FICO scores between 580 and 669 have fair credit. The 15.8 percent percent of consumers in this range may not have as many borrowing options as people with good scores. You may find you’re not eligible for certain credit cards or mortgages, though the good news is that many lenders will still approve loans with this score.