A FICO score is a type of credit score used by lenders to assess the credit risk of a borrower and determine the likelihood that the borrower will repay their debts on time. It is a three-digit number ranging from 300 to 850, with higher scores indicating better creditworthiness. The score is based on information from a borrower’s credit report and considers five key areas: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit accounts. This score helps lenders decide whether to approve loans or credit and what rates to offer. FICO scores are widely used in the United States, especially for mortgage approval decisions, and are considered a standard measure of creditworthiness. A score between 670 and 739 is generally considered "good," while scores above 800 are "exceptional." Maintaining a good FICO score involves paying bills on time, keeping credit utilization below 30%, and having a mix of credit types. Because the score can vary slightly depending on the credit reporting agency and the specific version of FICO used, you may have multiple FICO scores. In summary, the FICO score is a crucial numerical indicator used by lenders to evaluate the risk of lending to an individual based on their credit behavior and history. It affects loan approvals, interest rates, and credit terms. This information comes from several reliable sources including Investopedia, NerdWallet, the Consumer Financial Protection Bureau, and FICO itself.
