FICO Score What and How

How FICO Scores Work and What They Mean

What is your FICO Score?

If you have ever applied for a loan then you know the main thing that matters is your FICO score. Your credit score. This number has the power to make your loan’s interest low and easier to pay back or it can make it a pile of crap with a high-interest rate that will leech more of your money out of your wallet. With so much riding on this number, you need to know some things: what the heck is going on here? Who decided this was the number and what does the number even mean?

The corporation that calculates this score is called the Fair Isaac Corporation.

Well, Fair Isaac, who are you and why are you so judgy? More importantly, how do you judge?

The Fair Isaac Corporation was founded by William Fair and Earl Issac in the 1950’s. William is an engineer and Earl is a mathematician and together they created a data analyst software that could rate and assign a number to a person based on their creditworthiness. This number is called the FICO score. It’s calculated by the criteria below.

These categories make up your credit score

  • Paying bills on time and not missing payments
  • Debt to credit utilization. Basically, if your cards have high or low balances. High balances make you riskier.
  • Credit history. How long you have had your credit card or account open and if it’s been in good standing.
  • Types of credit. Can you juggle several open accounts such as a mortgage, car loan, and a credit card responsibly? There is a range of credit types, store credit cards and payday loans are on the lower end while car loans and mortgages are on the higher end.
  • New or opened accounts. Opening a lot of accounts at once can hurt your credit.

Understanding Credit Score Ranges

800-850 is considered to be the Excellent range. People who fall into this category have shown their creditworthiness by being consistent. They pay their bills on time and never miss payments and have low card balances with a good range of types of credit over a long period of time. Good for them. They get all the best interest rates when applying for loans, which is a  huge, fatty bonus. It’s a big deal. We love low-interest rates and we want them too! People with excellent credit are probably not going to be denied new credit lines or accounts since they have proven to be so creditworthy.

740-799 Very good credit. This category is the same as the above category just slightly less consistent. People will still get offered lower interest rates and have a high chance of being approved for new lines of credit.

670-739 Good credit. Chances of new accounts and prime interest rates fall just a bit here. Maybe you have never missed a payment, but your cards are maxed out. There’s probably just one or two things slightly off with your credit that’s landed you in this range.


As of January 2019, America’s average credit score has soared to 695. Just a fun fact.


580-669 Fair credit. People are still doing okay in this range. Maybe they have hit a couple of bumps in the road, but they have never totaled their metaphorical car or needed any major repairs. Maybe times are hard but they are getting through it without any major upsets or dings to their reports. You can still get a loan here, but the interest rates are going to start costing you.

579 and under Poor credit. No shame in being here. Whether you are building credit and just don’t have the history to pull your number up yet, or you made some mistakes and have significantly damaged your credit, it can all be fixed. Every single person has been here. Just be aware that getting a loan is going to be difficult and expensive.

Within these numbers is a whole host of benefits and complexities.

To learn more about your FICO credit score, read The Ultimate Guide Post and to find out how to raise your credit score to a new level read 5 Steps to Raise Your Credit Score When You Are Struggling.

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