FICO® Score
FICO® Score is a type of credit score developed by the Fair Isaac Corporation that is widely used by lenders to assess an individual’s credit risk based on their credit history. This is evaluated within Nature of Credit Scores.
Plain-Language Meaning
A FICO® Score is a three-digit number that summarizes your creditworthiness, helping lenders decide how likely you are to repay borrowed money.
Practical Example
If you apply for a credit card, the issuer may check your FICO® Score to determine whether to approve your application and what interest rate to offer you.
What It Does Not Mean
FICO® Score does not refer to every type of credit score, nor does it represent a detailed report of your entire credit history; it is a specific scoring model among several used in the industry.
How the System Uses It
The system uses the FICO® Score as a standardized measure to evaluate credit risk, influencing decisions on loan approvals, credit limits, and interest rates based on the score’s range and the applicant’s credit profile.
Common Misconceptions
- “All credit scores are FICO® Scores.” There are multiple credit scoring models, and FICO® is just one of the most commonly used.
- “FICO® Scores are the same at every lender.” Lenders may use different versions of the FICO® Score or other scoring models, so scores can vary.
- “Checking your own FICO® Score will lower it.” Viewing your own score is considered a soft inquiry and does not impact your credit score.
Related Pages
Related Glossary Terms
FAQ
- Why do lenders rely on FICO® Scores? Lenders rely on FICO® Scores because they provide a consistent, data-driven way to assess the likelihood that a borrower will repay debts, helping to manage lending risk.
- Can my FICO® Score change over time? Yes, your FICO® Score can change as your credit behaviors and information in your credit report are updated.