When applying for a home loan or credit card consumers are often told their application approval and interest rates will be determined by their FICO® or credit score. But many are left wondering what does this truly mean, and why is it important? Here we answer some of the most common questions consumers ask regarding FICO credit scores.
What is a FICO® score?
A FICO score is a number typically ranging between 300-850, which indicates how likely a consumer is to repay a loan based on their credit history. FICO was introduced by Fair Isaac Corporation in 1989 and represents one brand of credit score.
What is a good FICO score?
A good FICO credit score typically falls in the 670-739 range. A score of 800-850 is considered exceptional. However, individual lenders or credit card companies may have their own criteria for what qualifies as a good score. A score in a good or excellent tier can give consumers access to lower interest rates and more options.
What are the scores used for?
Lenders use FICO credit scores to help make decisions on whether to approve a loan application or credit card. Utility companies and landlords also use credit scores to decide on deposit amounts and determine eligibility for renting.
How is a FICO Score Calculated?
Fair Isaac Corporation applies a specific formula to the data in your credit report to generate your score. There are different versions of FICO scores that serve a variety of industries.
What Affects a FICO Score?
Several factors influence credit scores including:
- Amount of overall dept
- Payment history
- New applications for credit
- Types of credit utilized
- Age of credit
FPN’s PreQual solutions can provide lenders with your full credit report and FICO® and VantageScore® credit scores to quickly prequalify you for a loan without affecting your credit score. To obtain a free copy of your credit report visit www.AnnualCreditReport.com
Lenders or mortgage brokers looking to improve their customer lifecycle with a fully-customizable loan prequalification solution should contact FPN to learn more about PreQual.
FICO® is a registered trademark of Fair Isaac Corporation