Personal finance | October 12, 2022 | Chris Morrison Show For a three-digit number, your Fair Isaac Corporation, or FICO® Score carries a lot of weight. From applying for a new credit card with attractive rewards, or a personal loan to cover a large expense, to getting a mortgage for a house or taking out a private student loan for college, your FICO® Score plays a key role showing banks and other lenders that you’re a creditworthy individual who can take on the financial responsibility of borrowing money and paying it back. Having a good FICO® Score can qualify you for better borrowing terms and ultimately save you money.Your FICO® Score is one of the most important numbers associated with your finances. As a result, you’ll want to make sure that you’re aware of your FICO® Score and also practicing positive behaviors that can help you build and maintain a strong one. For some young adults, FICO® Scores may not be top of mind. According to Sallie Mae’s “Majoring in Money 2019” research, which explored the financial habits of young adults ages 18-29, college students were the least likely to be aware of their FICO® Score, to have viewed their credit report, and to identify which behaviors could have a positive or negative effect on one’s score. To help get you familiar with FICO® Score and set you on the path to building a good credit profile, let’s break down what you need to know: What is a FICO® Score?Your FICO® Score (i.e. your credit score) is a measurement of your creditworthiness. It informs lenders, such as banks and credit unions, about your ability to take on debt and pay it back. In general, the better your score, the better you’ll look to lenders when you’re applying to borrow money. A FICO® Score is a number, generally between 300-850, with 300 representing the poorest FICO® Score and 850 representing the strongest. According to the credit reporting agency Equifax, a good FICO® Score is generally considered to be in the range of 670-739, with scores between 740-799 viewed as very good, and scores above 800 valued as excellent. Although there are a few different credit score models out there (e.g., VantageScore), FICO remains the most commonly used, with over 90% of U.S. lending decisions referring to that model. In reviewing your FICO® Score, lenders can see your borrowing history and estimate your credit risk—in other words, how likely you are to repay your debt. Specifically, your FICO® Score is determined by five key components:
What are the benefits of having a strong FICO® Score?From having access to the best interest rates, to getting approved for credit cards with competitive perks, there are a lot of attractive benefits to having a good FICO® Score. Here are a few to keep in mind:
So, now that we’ve run through what a FICO® Score is, why it’s important, and the benefits of building a very good one, let’s break down how you can quickly check your score and credit report to see where you currently stand. How do you check your FICO® Score and credit report?Checking your FICO® Score has never been easier! First off, most credit card companies and banks provide you with instant and free access to your FICO® Score—usually in the form of a dashboard widget or icon when you log in to your account. From there, you can simply click to view your current score, see what is affecting it, and even things you can do to improve it. Additionally, you can access your free FICO® Score and credit report online via any of the three main credit reporting agencies: Experian, Equifax, or TransUnion. Different from your FICO® Score, your credit report is a full summary of how you’ve managed your credit and debt accounts. You’re entitled to one free copy of your credit report every 12 months from each of the three credit reporting agencies, your report may not be the same across all three (as they can vary based on the scoring model used). Overall, get in the habit of checking your FICO® Score often to make sure you’re aware of where it stands, and learn what steps you can take to improve it! How to Improve Your FICO® ScoreAs you take on new debt, make credit payments, and continue to establish your creditworthiness, your FICO® Score is always changing. Therefore, you’ll want to make sure that you’re practicing good behavior. Here are a couple of things you can do right away that can set you on the right path toward improving your FICO® Score:
Since your FICO® Score is constantly changing as you pay your monthly bills and take on new lines of credit, there are always opportunities to improve it. By having a regular awareness of your score and exercising creditworthy behaviors, you can improve your FICO® Score over time and enjoy the many financial benefits it has to offer. Is FICO score the same as credit score?Is "credit score" the same as "FICO® score"? Basically, "credit score" and "FICO® score" are all referring to the same thing. A FICO® score is a type of credit scoring model. While different reporting agencies may weigh factors slightly differently, they are all essentially measuring the same thing.
Is FICO score free to check?If your bank, credit card issuer, auto lender or mortgage servicer participates in FICO ® Score Open Access, you can see your FICO ® Scores, along with the top factors affecting your scores, for free.
Can you calculate your own FICO score?It's impossible to calculate a credit score yourself, but you can monitor your score for free—and the general factors that promote good scores are well known and worth understanding.
What is a good FICO score?Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
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