Understanding Your FICO Credit Score

These days, your FICO credit score, which is based on information contained in your credit report, is used to calculate everything from your mortgage and credit card interest rates, to your auto insurance premiums.

For this reason, it is critical to understand your FICO credit score, how it is calculated, and what you can do to improve it.


This guide:

    • Introduces the formula used to calculate your FICO score

    • Breaks down in detail how the various factors affect your score

    • Shows how it easy it is to see your credit score online

Get your FICO credit score

See your FICO credit score immediately, with Equifax Score Power. You can subcribe to email alerts warning you of changes in your score, see your full credit report, and even check your report at all three bureaus. See your credit score now

What is a credit score?

Your credit score, in a nutshell, is a snapshot of your credit-worthiness at any given point in time, expressed in numerical fashion. (The way that, say, a baseball player's hitting ability on any given day in the season can be expressed with a batting average).

The idea behind credit scores, and the formula used by most lenders and credit bureaus to compute them, was developed by the Fair Isaac Corporation (FICO, for short) in the late 1950s, and perfected in the 1980s.

Credit scores were developed in order to make it easier for lenders to make fast decisions on whether or not to grant credit to prospective applicants. They later begin to be used by insurers to decide on the insurability of home and auto owners.

How do you know if your FICO Score is good or bad?

Lenders have different requirements for a minimum score before they'll consider lending to you, but overall, the following should provide you with a general idea of where you stand:

    • 300-620 - High risk
    • 620-690 - Medium to high risk
    • 690-740 - Medium risk
    • 740-780 - Low to medium risk
    • 780-850 - Low risk - Good for you!

(Most people's scores fall somewhere between 300 and 850).

Would you like to know where you stand? Check your credit score instantly!

How your credit score is computed

Your FICO credit score is derived from five important factors (shown here with the approximate level of importance to you overall credit score):


    • Your payment history 35%
    • The amount of money you owe 30%
    • The length of your credit history 15%
    • New debt and credit inquiries 10%
    • Your credit mix 10%


When we say that the levels of importance attributed to each factor is only approximate, we mean it. Different lenders score differently, so use the above figures as a rough guide only.


We'll explore each factor in detail in the following pages. Click on one of the links above, or simply go to the next page...


Next: Your payment history as reported in your credit report