What is a FICO score?

by | Credit

It’s time to open a new business, get the loan for the new car or put the down payment on your dream home, but the past comes back to haunt you in the form of your FICO score. It can be daunting to be in a position where your future is determined by your past. This unfortunately is where many Americans find themselves.

So, what exactly is your FICO score and why does it matter?

A Fair Isaac Corporation (FICO) score or as it is otherwise more loosely referred to as your credit score, essentially is an individual’s financial report card. Scores range from 300-850 and just as important as grades were scrutinized in school for an individual to obtain acceptance into the finest colleges, our FICO scores are scrutinized by the financial world to determine if we qualify for various financial gains and interest rates for things such as loans and insurance. Generally speaking, the higher your FICO score, the more options are available to you.

Here are the average ranges:
781-850- EXCELLENT
661-780- GOOD
601-660- FAIR
500-600- POOR
300-499- VERY POOR

*Please note that the average FICO score in the United States was 711 in 2020 (data from Experian.com)

Understand that FICO scores are calculated by assessing an individual’s payment history, debt ratio, length of credit history and the types of accounts open. This information is ever-changing and therefore changes can be made to improve the score. Instead of feeling hopeless, I want to suggest some simple steps to help you address your FICO score before it robs you of your future. 

  1. Obtain your FICO score and pull all credit reports to assess for any inconsistencies and/or delinquencies that may need to be addressed.
  2. Call your creditors if you are in default and discuss a payment plan with them that is attainable for you.
  3. Make payments on time. This is the best way to improve your FICO score.

If you bury your head in the sand and ignore it, the problem unfortunately will no go away and will follow you for the rest of your financial life so go ahead and take charge. Make the calls and take the steps to regain control over your financial future. 

Remember…Vision for your financial tomorrow is only one step away. Are you ready to take that step?