Oct 12, 2012

What's in a Name, FICO

This is the scoring that is used for credit reporting. FICO is a public company that provides analytics and decision making services, including credit scoring intended to help financial services companies make complex, high-volume decisions.

FICO was founded in 1956 as Fair, Isaac and Company by Bill Fair and Earl Isaac. It went public in 1987 and was originally called Fair, Isaac and Company, it was renamed Fair Isaac Corporation in 2003, then changed its name and ticker symbol to FICO. It also sells other financial related products.

The big three credit reporting companies use this scoring to determine your creditworthiness. Each has its own name, but all use the FICO calculations methodology. Score is calculated on the following. Payment history 35%, amounts owed 30%, length of history 15%, new credit 10%, and types of credit used 10%. It includes only information on your credit report, and nothing else, like race, age, employment, income, etc. It is a snapshot in time and changes as your circumstances change, so you can influence the number for better or worse. Scores range from 300 to 850 with 60% of people falling between 650 and 799.

FICO score is used for home and auto loans, calculating interest rates, and buying insurance, etc. Some states allow employers to use the score to determine potential hiring.

Some tips - Paying down credit cards and revolving credit are better to increase your score than paying off auto or home loans. Also, making payments on time is important. Closing accounts does not make them go away.

You can get your credit history for free once a year, but I have not found a way to get an actual FICO score without paying something. There are free trials, but they entail an automatic enrollment in a program that takes some work to get out of before a payment is subtracted from your credit card. If your credit is OK, do not worry about your FICO.