What Exactly is a FICO Score?

The FICO score is the most widely used credit score model in the United States. The word ‘FICO’ is actually an acronym for the Fair Isaac Corporation. The FICO score is an ever-changing number calculated based on your credit files that determines whether a person will be able to pay back the loan amounts in due time.

Credit scores are used in order for banks as well as other entities, such as potential employers and even many landlords, to make decisions affecting your application. These decisions based on your FICO score may affect whether or not you will be able to receive credit, need more collateral, larger down-payment, interest rates, more income verification or more.

The FICO score is a basis of determining whether a person could potentially default on a loan and does not make any statements on whether an individual is more or less likely to declare bankruptcy. The actual score for determining borrower’s likelihood of declaring bankruptcy is actually most commonly referred to as a BNI score.

There are only a few different credit reporting agencies that provide FICO credit scores for potential borrowers and they are Equifax, Experian and TransUnion. Although the scores are al coming from Fair Isaac, they are all presented as different numbers, but with the same overall interpretation.

In order to provide individuals with the right credit score, Fair Isaac has three different types of credit they prepare scoring methods for. The three types of credit they provide are for mortgage loans, auto loans and consumer loans. It is best for an individual to follow the rating for the type that best suits them, even though the scores may differ slightly.