What's a FICO?

FICO reaches into your life in many different ways - whether you know it or not.  When you apply for a job, a loan, a mortgage, for car insurance or to rent an apartment, most likely FICO will affect the outcome of that application.

FICO (formerly Fair Issac) is the name of the company that developed the analytics most commonly used for determining your credit score.  Your FICO score is a number that many use to determine the quality of your character.  If you are borrowing or renting, are you likely to pay as agreed?  If you don't pay your bills (a form of dishonesty), what kind of employee will you make?  Are you a good risk for insurance?

Generally speaking, here's how the scores break down:*

• Over 750: Excellent - you should be eligible for any type of credit you want at the best rates
• 720-750: Very good - you should be eligible for almost any type of credit and will usually get the best rates
• 660-720: OK - you will be able to get most types of credit, but will often not get the best rates or products
• 620-660: Below Average - you will still be able to get credit in many cases, but will have to pay higher interest rates than others
• Below 620: Bad Credit - you will have difficulty obtaining credit and when you get it, your rates will be high

*Source: http://www.nextadvisor.com

Each company or institution that checks your credit score may have slightly different definitions of excellent credit, good credit, etc. 

There are three major credit bureaus - TransUnion, Equifax and Experian - and each may have a slightly different score for you.  Generally you have to pay one of these credit bureaus to actually get your score.  It's good to check your credit report periodically to make sure everything is accurate and clear up any discrepancies you find. You can (and should) get your credit report free annually through annualcreditreport.com - one from each of the three credit bureaus - but it won't tell you your FICO score.

The next time you apply for a loan, ask what your credit score is - that way you won't have to pay for it and you'll know what ballpark you're in.  At my Credit Union, we gladly share this information with our members, and will work with them to resolve discrepancies and improve their score.

How is your credit score determined?

The exact algorithm for determining your credit score is a closely guarded secret.  However, there are some things that we know do affect the score.  Next week, I'll share what we do know about what goes into FICO's "secret sauce."