What Is A Fico Score? How Do I Improve My Fico Score?

A “Fico score” rates the likelihood that you’ll default on a loan. FICO scores are compiled by the Fair Isaac Corporation (F.I.C.O. being an acronym for Fair Isaac COrporation). The Fair Isaac Corporation was founded in Minneapolis in 1956 by two men whose last names were “Fair” and “Isaac”. A FICO score is used by credit institutions to determine whether you will pay off debts on three major types of credit: car loans, home mortgages and consumer credit. “Consumer credit” is another word for credit cards and their like.

Fair Isaac Corporation calculates your FICO score. The three major credit rating agencies (Equifax, Experian and TransUnion) each use the Fico score when determining your credit rating. In fact, Experien uses you Fico score directly when assigning a credit score to you. Equifax creates their own credit rating, which Equifax has called by various names over the years: Beacon, Beacon 96 and Beacon 5.0. Meanwhile, TransUnion has fielded their own various credit scores over the years: Empirica, Empirica Auto 95, Precision Score and Precision Score 93.

What Is a FICO Score?


The FICO score is used by over 1,400 financial service firms in American and globally. In fact, ninety-nine of one-hundred of the biggest American banks are FICO clients, while forty-nine of fifty of the largest banks worldwide are FICO clients. Even the 10 biggest U.S. telecommunications firms use the Fico score, so your cellphone company part of the FICO information network. Therefore, improving your FICO score is extremely important when you have bad credit.

Improving Your FICO Score

In order to begin improving your FICO score first you’ll have to pay down your credit debts. This is probably going to be painful, but it’s a necessity. Don’t have revolving credit, which is where you pay off one debt by maxing out a credit card or taking out a loan with as high or higher credit lines.

To raise a credit score, you need to show that you can manage a credit line responsibly. So get a credit card and pay off your credit debts. People with no credit cards are deemed a risk, because you haven’t shown you can manage a credit card line of debt. At the same time, this is better than bad credit history, because your bad credit decisions stay on your credit history report for 2 to 7 years.

Having a bunch of credit cards won’t help your FICO score. That’s because Fico will calculate the debt ceiling you can possibly have when determining whether you will default on your loans. For instance, if you have 5 credit cards with $5,000 lines of credit on each, you could possibly charge $25,000 of debt at any one time. Fair Isaac Corporation will look at the multiple credit lines, look at the worst-case scenaios and determine you could max out all these cards and default on any new loan.

Once you have started paying your debts, you might have to wait a while to see if your credit score goes up. Remember that you won’t see immediate results from your decision to pay off your debts in a timely fashion. It takes time for credit information to drop off your credit report.