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It’s important to keep track of your credit score as you make financial decisions throughout life. Your FICO credit score is based on the way you manage credit, from your payment history to your recent credit applications. It plays a major role in your ability to access new credit.
That’s why it’s important to understand what a FICO score is, how it’s calculated and how FICO score ranges affect everything from whether your next credit card application gets accepted to how much interest you’ll pay on your mortgage.
Let’s take a look at what FICO is, how to determine where you fall on the FICO score chart and where to get your score for free.
What is a FICO score?
A FICO score is any credit score provided by the Fair Isaac Corporation. The Fair Isaac Corp. is not the only service that provides credit scores — VantageScore is another common credit scoring model and FICO’s main competitor.
But FICO is quite common among lenders and creditors, so it can help to look at your FICO score specifically before you apply for a new loan or line of credit. According to MyFICO.com, 90 percent of top lenders use FICO scores to make lending decisions, such as whether to accept or decline a credit application or how much interest to charge.
What are the FICO score ranges?
Every FICO credit score falls within one of five FICO score ranges between 300 and 850. These rankings are designed to help lenders understand whether you are likely to use credit responsibly or whether you are likely to be a credit risk.
Here’s a breakdown of the five categories of FICO scores:
- 800-850: Exceptional — Your credit is near perfect. Lenders consider you an exceptional consumer and are likely to offer you very favorable interest rates and loan terms.
- 740-799: Very good — Your credit is well above average and you are considered a responsible borrower. You are eligible for nearly all of today’s best credit cards as well as lower interest rates on credit cards, mortgages and loans.
- 670-739: Good — Your credit score is close to the national average, and you have proven that you can handle credit accounts without defaulting. Lenders are likely to accept your credit applications, but may not offer you the best interest rates.
- 580-669: Fair — Your score is below average, which indicates that you might be a potential credit risk. You might have more difficulty taking out new lines of credit.
- 300-579: Poor — Your score is well below average and your credit history indicates that you might not be able to handle credit accounts responsibly. Lenders may reject your credit applications unless you specifically apply for credit cards designed to help you rebuild your credit.
What is a good FICO score?
A good FICO credit score is technically any score of 670 or above.
However, if you really want to take advantage of lower interest rates, better credit card rewards and more favorable loan terms, you’re going to want to get your FICO credit score into the very good or exceptional range.
Building a good credit score is one of the best things you can do for your overall financial health. But getting your credit score into the good FICO score range is just the baseline. In fact, the average FICO credit score in the U.S. was 716 as of August 2022.
When you have good credit, lenders understand that you are unlikely to default on your debts — even if you haven’t yet proven that you are an exceptional credit consumer. You may not qualify for some credit cards designed for people with excellent credit, but if you’ve gotten yourself into the good FICO score range, give yourself a pat on the back. Then, you can ask yourself what you can do to get your credit score even higher.
Why is your FICO credit score important?
Your FICO credit score matters because lenders, landlords and insurance companies use credit scores to help them make decisions about whether to grant you access to financial products.
A credit score that falls within the very good or exceptional FICO score range, for example, could save you a lot of money on your mortgage. On the other hand, a credit score that falls within the fair or poor ranges could make it more difficult to access new lines of credit. A low FICO credit score might even affect your ability to rent an apartment.
This is why having good credit is so important. Once you build a good FICO score, doors may begin to open for you. If you continue to increase your FICO score, you’ll have access to better credit cards, higher rewards, lower interest rates and more financial opportunities.
FICO scoring models are dynamic
FICO is continually updating its credit score models, which is why there are many different FICO scores. Currently, many lenders use the FICO 8 model to make credit decisions — but FICO most recently introduced the FICO Score 10 Suite (which includes FICO 10 and FICO 10T) in 2020.
This latest scoring model is designed to improve on both the FICO 8 and FICO 9 models by providing a more accurate assessment of an individual’s potential credit risk. FICO 10T even provides trended data over a period of months so that lenders can get a better idea of your financial situation.
There are also different types of FICO credit scores. If you are refinancing a car loan, for example, a lender might look at your FICO Auto Score. If you are applying for a credit card, a lender might check either your FICO 8 score or your FICO Bankcard Score.
FICO is also working to help more consumers access the benefits of a good FICO credit score. The UltraFICO score factors bank account balances and other noncredit data into your FICO score. This makes UltraFICO an excellent option for people who have a limited credit history or who want to build credit without a credit card.
But even with all the different scoring models out there, you don’t necessarily need to keep up with each of your individual scores. Knowing your FICO 8 score is good enough for most situations, according to FICO, since FICO 8 is the most widely used credit score model. That said, you may want to look into more specialized FICO scores if you are considering applying for a car loan or taking out a mortgage.
How is your FICO score calculated?
FICO calculates your credit score by pulling data from your Experian, Equifax and TransUnion credit reports. FICO uses this information to generate a three-digit FICO credit score based on the following five factors:
- Payment history (35 percent): Your history of on-time payments. Late payments can seriously damage your credit score.
- Amounts owed (30 percent): Your credit utilization ratio — that is, the amount of money you owe vs. the amount of credit available to you. Paying off your credit card debt is a great way to improve your credit score.
- Length of credit history (15 percent): The amount of time you’ve been using credit. If you are new to credit, your credit score could go up as you build a longer credit history.
- Credit mix (10 percent): The different types of credit accounts under your name. If you have both revolving debt (like credit cards) and installment debt (like loans), your credit score could get a boost — but don’t worry if you haven’t taken out any loans yet. You can build good credit with just credit cards.
- New credit (10 percent): This factor includes the number of hard credit inquiries on your account. If you apply for too much new credit at once, you could lose FICO score points — so consider waiting three to six months between credit applications. However, if you are applying for a mortgage loan or car loan, multiple inquiries from lenders within a “shopping window” of 14 to 45 days (depending on the credit score model used) will all be considered part of one inquiry and won’t lower your score multiple times.
How to get a free FICO score
It’s a good idea to check your credit score on a regular basis. If you want to get a free FICO score, here are some tips:
- Many banks and credit card issuers offer access to free credit scores. Check your online account for details about your specific options.
- A good credit monitoring service will not only provide you with updated credit score information but will also help you understand why your credit score might have changed and what you can do to improve your score in the future. If you want a free FICO 8 score, consider signing up for Experian’s free credit monitoring service.
- Some personal finance apps, such as Mint, offer free credit scores. However, Mint uses the VantageScore model — which means that although you’ll still get a good overview of where you stand, you may need to look elsewhere for a free FICO score.