What Is FICO?

FICO, which stands for Fair Isaac Company, is the most common formula used for determining a credit score. The FICO formula was designed to answer the question: How likely is it that this borrower will repay his or her debts on time during the next 24 months. A high FICO score means that you are very likely to repay your debts over the next 24 months. A low FICO score means that you are high-risk, which means you are in the category of people who are most likely to make a late payment or default within the next 24 months.

If your credit score is Then
720 and above You have excellent credit and will qualify for loans and interest rates reserved for borrowers in the highest echelon.
700 to 719 Your credit score is great, and you are considered a low-risk borrower. However, you might not qualify for the very best loans, and your interest rates might drop a little if you raised your score a few extra points.
660 to 699 You have fair to good credit. When the economy is doing great, you will probably qualify for a loan, and it might even be a good loan, but only if the rest of your application is strong. You definitely won’t receive the best loans or the lowest interest rates. And if the economy is weak, you might not qualify for a loan at all!
620 to 659 You have weak to borderline credit. The rest of your file will need to be perfect to qualify for an acceptable loan, if you qualify at all. You will pay higher interest rates, and your loan terms will be less-than-ideal.
620 and below You are considered a subprime borrower, which means you have poor credit. Your loan terms will be far from ideal, and you probably will not qualify for a loan at all unless the economy is doing well. If you do, you will pay the highest interest rates. The lower your score, the worse your terms.


Though there are tons of formula out there that different organizations use to calculate a credit score, we believe that the only credit score you should pay any attention to is the one determined by the FICO formula.

You see, anyone with information about your credit history can create a formula to determine your creditworthiness. The three credit-scoring bureaus Equifax, TransUnion, and Experian all collect information about your activity on credit cards, mortgages, installment accounts, car loans, student loans, and the like. And they have all different proprietary formula that they apply to this information to generate a credit score: Equifax offers something called an Equifax Credit Score. Experian offers both the PLUS score and the VantageScore. And TransUnion has its own credit score, too!

If all these names are confusing, here’s the important part: When deciding whether to extend a loan to you, your potential creditors want to know how risky you are. Currently, the formula they trust the most to determine your creditworthiness and therefore your credit score is called FICO. In fact, FICO is the score that is almost exclusively used by creditors, banks, and the like.

So all those other credit scores, like Vantage, PLUS, Equifax, and Experian, are pretty useless because they do not reflect the same score that your lender will see when pulling your credit report and credit score. So don’t spend your money on buying a score that isn’t a FICO score. The only thing these scores will do is paint an unrealistic picture of the loan terms you can expect.

In other words, FICO is the only credit score that matters. You can buy your credit score from www.720FICOScore.com.

Not to confuse matters, but

Though Equifax, TransUnion, and Experian have all created their own formulas for determining credit scores, they also apply FICO to the information they have on file about you. So you can get a FICO score based on your Equifax credit report; another FICO score based on your Experian credit report; and yet a third score based on your TransUnion credit report.

As a result, your three FICO credit scores might be different, depending on what information the credit bureaus have about you. For instance, if you have a credit card that doesn’t report to all of the three credit bureaus, your FICO score will be different among the three bureaus. On the other hand, if your information is identical at all three credit bureaus, each FICO score will be identical because the same formula is being applied to the same information.

So what do lenders do with these three FICO credit scores?

They ignore the highest score and the lowest score, and they base your loan terms on the middle score. If your Equifax score is 702, your Experian score is 603, and your TransUnion score is 602, they will toss out the high score (702) and the low score (602) and consider your loan terms based on your 603 Experian score.

Equifax  702

Experian 603

TransUnion  602

So if you want to qualify for a loan, or if you want to qualify for better terms on your existing loans/credit cards, you must follow the FICO model and demonstrate the behaviors that will boost your FICO score. To learn your FICO score, visit www.720FICOscore.com, the only place you can buy all three FICO scores.