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Get To Know Your FICO

What is your FICO score? What is FICO anyway?

FICO stands for Fair Isaac Corporation. The worldwide corporation was founded in 1956 by engineer Bill Fair and mathematician Earl Isaac. They developed the FICO score. Fair Isaac’s corporate headquarters are located in Minneapolis, Minnesota, USA. Fair Isaac’s personal credit site is

A FICO score is tied to almost all your financial decisions:

  • the interest rate you’ll pay on your credit card
  • a car loan
  • your home mortgage
  • other loans

A high FICO score (high credit score) is good and a low FICO score is bad. An average credit score is, well, average. Your goal is to get the highest credit score you can.

For example, if you have a high credit score you can get a lower interest rate credit card. If not, your credit card interest rate could be higher and you might not even be able to get a credit card. This also applies to car loans, home mortgages and other loans.

Your FICO score is based on how well you pay your bills and the debt you carry.

Here are the five broad categories Fair Isaac uses to sort your data from the credit bureaus:

  1. Paying your bills on time – 35%
  2. Total balance of credit cards and other loans – 30%
  3. Length of credit history – 15%
  4. New account and recent applications for credit – 10%
  5. Mix of credit cards and loans – 10%

Your FICO score is shared with the various agencies that you apply to for credit and various loans. They use it to size you up financially. It determines if you’re financially accepted and what financial terms are offered to you.

Understanding Credit Scores

What Credit Bureaus?

Paying your bills, credit cards and loans get reported to the credit rating agencies. The three major credit bureaus that report to Fair Isaac Corporation are:

  1. Equifax (800-525-6282)
  2. Experian (888-397-3742)
  3. TransUnion (800-680-7289)

That also means you will have three scores, one from each bureau.

After FICO sorts all your financial data out, it gets neatly placed in a score range like this:

760-850 – Excellent Credit Score Range
500-579 – The Minimum Credit Score Range

A high FICO score will help you get a lower interest rate mortgage for example. That also means, if you have a lower FICO score you’ll get a higher interest rate on a mortgage. You’ll be paying more for that mortgage over a long period of time.

See this chart taken directly from Fair Isaac’s personal finance site.

Mortgage Credit Report

Get Your FREE Reports

Get your credit reports and make sure what’s on them is correct. Do this at least annually after you’ve finished your tax return just to get your annual financial tasks out of the way. Go to or call 877-322-8228.

You are entitled to one free report from all three bureaus every year and those reports will contain different credit information among all three.

As you fill out the appropriate information for your credit report, don’t be surprised when you run into advertisements for different credit services at each bureau. Either ignore the offers or pay for what you want.


You might be surprised what you find on your credit reports. If you have any disputes about what you find, contact that credit bureau first. If you need to drill down to the organization that reported something you find questionable, then contact that organization to find out more.

You might also be surprised to find mistakes caused by identity theft. Identity theft has become such an epidemic, but it can be dealt with. Check with the FTC for more information on identity theft.

Major Purchases

You’ll want to check and clean up your scores before you make a major purchase like a home mortgage. With any loan, you can ask the lender what score they’ll use and this will allow you to be proactive in reviewing your credit scores. They might call the score something other than one of the three bureaus listed above, but ultimately the information gets back to one or more of the three credit bureaus.

You can get your FICO scores at but it will cost you a bit. Their product FICO Standard is $15.95 for one of your FICO scores. The FICO Deluxe product goes for $47.85 and gives you all three of your FICO scores – TransUnion, Equifax,and Experian.

Now What?

You’ll want to think and act according to the five credit scoring categories listed above.

  1. Pay your bills on time!! Make sure what you owe, gets to who it needs to BEFORE it’s due.
  2. Keep what you owe significantly lower than what you can spend. If you can borrow $10,000.00 on all your credit and you actually borrow $10,000.00, then that is NOT GOOD!! Pay your debt down, Pay your debt down, Pay your debt down!!
  3. Prove your credit history. Don’t cancel your credit cards willy nilly. This could actually hurt your credit history. Keep the credit card if it has a long history on it. If you are considering canceling your long history credit cards it would be better to cut those cards up rather than cancel them.
  4. Too many new credit accounts will hurt your credit score.
  5. A good mix of a credit card, a retail card and a car loan will help your credit score.

No FICO Score?

If you don’t have a FICO score, it could be bad for you when you go for a loan. A good place to start is with a credit card or a retail card with the lowest interest you can get, which might not be very low since you don’t have a FICO score yet.

Charge some stuff up that you CAN afford to pay off in a short time period – like right away so you don’t carry a balance more than a month. Stick to the rules of the card and the credit will be reported to the appropriate credit bureaus.

Don’t charge things like toothpaste and everyday grocery or gas for your vehicle type items.

Charge long term items like a reasonably-priced lamp that you’ll use forever or other long-term items like a personal finance book that will educate you on your personal finances for the long term.

Pay the minimum amount due or a bit more, way before they are due. Better yet, pay it off in one month. Make a rule for yourself – the payment WILL ARRIVE at the creditor no less than three business days before the bill is due. It’s better just to get ’em paid the moment the bill hits your mailbox.

Or, make your payments automatic from your checking account or the account your money goes into every month, to the creditor. This will make it extremely simple for you and all you’ll have to do is check to see if it went out automatically and if the creditor received the payment on time. You can do this all online.

Set up automatic reminders in your favorite calendar program and then you don’t even have to think about it. Just make sure you check your calendar everyday.

Secured Credit Cards

Another way to start your credit history is by using a secured credit card. This type of card is secured by a deposit and you can charge up to the amount you deposited.

However, you still need to act responsibly while paying the secured credit card. This will provide you with the best possible FICO score.

Ask the secured credit card company what credit bureaus they report to.

Mortgage Shopping

If you’re shopping for a mortgage and you have a bunch of lenders who are inquiring about your credit, this could hurt your credit. However, if you shop for a mortgage in a two-week time period, Fair Isaac (FICO) says this will count as one inquiry on your credit report.

Also, if you’re married or have a life partner and one of you has a significantly lower FICO score at least two ranges away, then the person with the higher score might consider applying for the mortgage alone to get the best interest rate. The person with the lower score can be added to the title later.

Financial Mess

If you think you’re in a financial mess and have credit problems, then don’t worry about your FICO score. Worry about fixing your mess first and then there will be time to correct your FICO score over the long haul. Believe me, this works. I had a horrible FICO score in my twenties and couldn’t get a credit card or a loan for anything. Paying my debts off, being financially responsible over the long haul, reviewing and fixing my credit reports annually got me on the right credit score path.

Kids and FICO Scores

If you want your kids to have a great FICO score and you have a great FICO score in the highest range, then add them to your credit card account as an authorized user. This will start their file at the credit bureaus with a great FICO score. You don’t even have to tell your kid about it if you don’t want to.

Teach them financial responsibility especially as they get closer to and in the teenage years, and what their FICO score means to them and to you. Once your child is of legal age and can get their own credit card then consider taking them off your account. That way, if your credit score goes lower for some reason, it won’t affect your child’s FICO score.

Your FICO score is your friend. I know it’s a boring topic but it’s necessary. Work on improving your credit record and your FICO score will go up. I have first-hand experience with this. 😉

Credit Card Sites

{ 2 comments… read them below or add one }

Cindy September 27, 2007 at 8:48 am

Very informative article. We just had our credit score calculated for a mortgage and I was wondering what the range was for the higher FICO Score. I’m a bit leary of the advise to pay minimum payment or just slightly more. This could lead to bad decisions for paying off larger payments like Car Loans and Mortgages earlier. I know when I first started out using credit cards that I thought I could get by just by paying off minimum payments. It wasn’t until much later I realized how slippery that slope can be.

Now, we strive to be debt-free! Our cars are paid off. Our Credit Card is paid in full monthly (which we use for everything–it’s the only way I can keep track of the money flow) and we had 10,000 left on our home mortgage! Of course, due to job relocation, we are having to move, but our Credit Report was in the Highest FICO Score range! And no, we do not make tons of money. We saved while both my husband and I worked and now manage on a 35,000 income.

Bill Stevens September 27, 2007 at 11:00 am

Great comments Cindy and congrats, that’s great.

I think when folks first start using credit it’s like jumping off a diving board. Kind of a nervous feeling of, “can this person handle their credit or not.” It’s definitely self control and understanding.

I know when I first started using credit cards I did not have any of this information. I just thought it was a great system to be able to buy things on credit. Oh the pain I had to go through to learn all this.


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