Two men checking their credit score on their phones
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When lenders want to assess your credit risk, the first place they look is your credit score. And most times, the score they pull is a FICO score.

So what is a FICO score? FICO is named for Fair Isaac Corporation, the analytics company that developed the modern version of the scoring model in 1989. It’s not the only credit score available, but it is the most commonly used credit score.

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What is a FICO score?

Because the FICO score been around for so long and is so widely used, many consumers do think of it as synonymous with a credit score. However, that’s not necessarily true: All Harley-Davidsons are motorcycles, but not all motorcycles are Harleys. Or consider the fact that brand names such as ChapStick or Scotch Tape have become generic terms for the products they pioneered.

It’s similar with FICO scores. There are many other different types of credit scores (more than 1,000, in fact), but not all are FICO scores, despite the term’s ubiquity. FICO’s biggest competitor is VantageScore, which was developed in 2006 by the three major credit bureaus: Equifax, Experian and TransUnion.

On the other hand, FICO—which is not a credit bureau—uses the personal financial data compiled by those same three agencies, among other information, to assess your creditworthiness.

In fact, because there’s so much different data to choose from when calculating credit scores, one consumer could have more than four-dozen FICO scores at once—which lenders might scrutinize or ignore, depending on the type of loan or credit you’re seeking.

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FICO’s credit score formula

The basic FICO score ranges from a 300 to 850. The higher the score, the more attractive you are to lenders. FICO calculates its scores by crunching numbers from many different data points drawn from your credit reports. It pays specific attention to five categories that are weighted according to importance.

  • 35 percent of your FICO score is based on your payment history. A solid reputation for making your loan payments on time each month is good. Any instances of bankruptcies, liens, repossessions, foreclosures or late payments will adversely affect your score.
  • 30 percent is based on the amounts you owe. It’s not necessarily a bad thing to have several credit accounts open at once, but owing too much money across too many different types of them could have a negative impact on your score.
  • 15 percent is based on the length of your credit history. The longer your track record of payment, the better for your score. FICO factors in the average age your accounts and the age of the oldest one.
  • 10 percent is based on your credit mix. Showing that you can manage different types of credit (mortgages, credit cards, installment payments, etc.) can have a salutary effect on your score.
  • 10 percent is based on recent searches for credit. Too many hard credit inquiries from lenders in a short period could indicate a risky borrower and ding your score.

The scores can still be variable

That standardized framework notwithstanding, your score might still vary across three major credit bureaus, which calculate your scores for you based on the data they specifically collect.

It’s also important to remember that lenders also have their own criteria for whether or not they extend credit, so depending on the loan you’re seeking, the actual numeric score you have may not be as all-important as you think.