What Is a FICO Score?
FICO stands for Fair Isaac Corporation — the company that created the most widely-used credit scoring model. Your FICO score ranges from 300 to 850. Higher is better. 90% of top lenders use FICO scores when making lending decisions.
You actually have multiple FICO scores — one from each of the three major credit bureaus (Equifax, Experian, TransUnion). They're usually similar but can vary based on which bureau a lender reports to.
| Score Range | Rating |
|---|---|
| 800–850 | Exceptional |
| 740–799 | Very Good |
| 670–739 | Good |
| 580–669 | Fair |
| 300–579 | Poor |
The 5 Factors That Make Up Your Score
FICO calculates your score using exactly five factors. Here they are — in order of how much they matter:
Payment History
Do you pay on time? This is the single biggest factor. Even one missed payment can drop your score 50–100 points.
Set up autopay for at least the minimum on every account.
Credit Utilization
How much of your available credit are you using? Keep it under 30% — ideally under 10% — for the best scores.
Pay your balance before the statement closing date, not just the due date.
Length of Credit History
How long have your accounts been open? Older accounts are better. Don't close your oldest credit card.
Keep old accounts open even if you rarely use them.
Credit Mix
Do you have a mix of credit types — credit cards, auto loans, mortgage? Lenders like diversity.
Don't open accounts just for the mix. Let this develop naturally.
New Credit (Hard Inquiries)
Every time you apply for credit, a hard inquiry is added. Too many in a short period signals risk.
Rate-shop for mortgages/auto loans within 14–45 days — multiple inquiries count as one.
Hard vs. Soft Inquiries
Hard Inquiry — Hurts Score
- →Applying for a credit card
- →Applying for a mortgage or auto loan
- →Requesting a credit limit increase
- →Private student loan application
Typically drops score 5–10 points. Stays on report 2 years.
Soft Inquiry — No Impact
- ✓Checking your own credit score
- ✓Pre-qualification checks
- ✓Employer background checks
- ✓Insurance quote inquiries
Zero effect on your score. Check freely.
Why This Actually Matters — In Dollars
On a $300,000 mortgage at 30 years: a borrower with a 620 score might get a 7.8% rate (monthly payment: ~$2,154). A borrower with a 760 score gets 6.5% (monthly payment: ~$1,896). That's $258/month difference — or $92,880 over the life of the loan. Your credit score is not a vanity number.
Credit Score Dos & Don'ts
Do These
- ✓ Pay every bill on time, every month — automate this
- ✓ Keep credit card balances below 10% of the limit
- ✓ Check your credit report free at AnnualCreditReport.com
- ✓ Dispute any errors on your report immediately
- ✓ Become an authorized user on a family member's old account
Avoid These
- ✗ Close your oldest credit card
- ✗ Apply for multiple cards in a short period
- ✗ Max out a credit card even if you pay it off monthly
- ✗ Ignore a collections notice — negotiate or dispute it
- ✗ Co-sign a loan unless you're ready to own that debt
Key Takeaways
Payment history (35%) and utilization (30%) make up 65% of your score — focus here first.
Your FICO score affects mortgage rates dramatically: a 620 vs 760 score on a $300K loan can cost $80,000+ extra in interest over 30 years.
You can check your score for free via your bank app, Credit Karma, or Experian — no hard inquiry needed.
Negative items (missed payments, collections) fall off your report after 7 years. Bankruptcies after 10.