FICO score
The most widely used credit scoring model, developed by Fair Isaac Corporation, ranging from 300 to 850 and used by lenders to assess credit risk.
Example
“Her FICO score of 820 put her in the 'exceptional' range, qualifying her for the best mortgage rates.”
Memory Tip
FICO = Fair Isaac Corporation. Your Financial IQ COre.
Why It Matters
Your FICO score directly affects your ability to borrow money and the interest rates you will pay on loans, credit cards, and mortgages. A higher score can save you thousands of dollars in interest over the life of a loan, making it one of the most important numbers in your financial life.
Common Misconception
Many people believe that checking their own credit score will hurt their FICO score, but this is false. Only hard inquiries from lenders count against your score, while checking your own credit report or score through authorized channels has no negative impact.
In Practice
If you have a FICO score of 760 and apply for a 30-year mortgage on a 300,000 dollar home, you might qualify for a 6.5 percent interest rate, paying about 1,896 dollars per month. However, if your score is only 620, that same lender might offer you a 7.8 percent rate, resulting in monthly payments of 2,290 dollars, costing you approximately 141,000 dollars more over the life of the loan.
Etymology
Acronym for Fair Isaac Corporation. The modern FICO score launched in 1989.
Common Misspellings
Check your credit score free — no impact
Related Terms
More in credit
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