Home What is a FICO score? A FICO score is a credit score developed by Fair, Isaac, and CO.  Credit scoring is a method of determining the likelihood that credit users will pay their bills.  Fair, Isaac began its pioneering work with credit scoring in the late 1950's and since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrower's credit history into a single number.  Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed.  The Federal Trade Commission has ruled this to be acceptable.  Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance.  Developing these models involves studying how thousands, even millions, of people have used credit.  Score-model developers find predictive factors in the data that have proven to indicate future credit performance.  Models can be developed from different sources of data.  Credit-bureau models are developed from information in consumer credit-bureau reports.   What's in a score?   About 60 percent of people have credit scores of 700 and above. The best number to have is 720 or above. If your score is 720, there's really no need to try and raise it because lenders lump you in the same category as folks with a score of say 800 or 820. At 720, you are viewed as a safe risk and typically receive a loan without problem and at a low interest rate. However, if your number is below 700, it's definitely worth your time to try and pump it up. How a FICO score is determined 35 percent Payment History: "Having a long history making of payments on time and no missed payments on all credit accounts is one of the most important items lenders look for." 30 percent Amount Owed: "This measures the amount you owe relative to the total amount of credit available. Someone closer to maxing out all their credit limits is deemed to be a higher risk of late payments in the future and this can lower their credit score." 15 percent Length of Credit History: "In general, a credit report containing a list of accounts opened for a long time will help your credit score. The score considers your oldest account and the average age of all accounts." 10 percent New Credit: "Opening several new credit accounts in a short period of time can lower your credit score. Also multiple credit report inquiries can represent a greater risk, but this does NOT include any requests made by you, an employer or by a lender who does so when sending you an unsolicited, "pre-approved" credit offer. Also, to compensate for rate shopping, the score counts multiple inquiries in any 14-day period as just one inquiry." 10 percent Types of Credit in Use: "Your mix of credit cards, retail accounts, finance company loans and mortgage loans is considered."  There are really three FICO scores computed by data provided by each of the three bureaus––Experian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score. How can I increase my score? While it is diffucult to increase your score over the short run, here are some tips to increase your score over a period of time.  Pay your bills on time. Late payments and collections can have a serious impact on your score.   Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score.  Reduce your credit-card balances. If you are "maxed" out on your credit cards, this will affect your credit score negatively.   If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score.  What if there is an error on my credit report? If you see an error on your report, report it to the credit bureau. The three major bureaus in the U.S.:  All have proceprocedures for correcting information promptly. Alternatively, your mortgage company may help you correct this problem as well. Equifax (1-800-685-1111) Trans Union (1-800-916-8800) Experian (1-888-397-3742) All have proceprocedures for correcting information promptly. Alternatively, your mortgage company may help you correct this problem as well. For a FREE, yes free-no strings attached--credit report go to AnnualCreditReport.com