Fico Score Full Form

Fico Score Full Form and Fico Score Meaning  are discussed in this post with appropriate information.

FICO Score is an  emerging term now a days used in business environment.

Your Credit score plays an important role in your financial life. Your credit score represents your ability to approve for loan and how much you pay to borrow money.

If you have a high credit score then it represents that you can easily qualify for a loan and can easily borrow money from lenders when you need and the interest rate is also low.

People with poor credit scores face a lot of difficulties in qualifying for a loan and they have to pay the high-interest rate on the money they borrow. Many Financial institutions use a credit score known as the FICO score in making the lending decision.

Here in this article, we have explained  what is a good FICO Score ? in more detail. After reading this article you will be able to know FICO SCORE and its related aspects.

 Table of Content

In this tutorial we have explained the following topics related to Fico score.

• What is a FICO Score?
• FICO Score Full Form.
• FICO Score Meaning.
• Who creates FICO Score?
• Why FICO is needed?
• Components of FICO Score.
• Various Range of FICO Score.

What is a FICO Score Full Form?

A FICO Score  Full Form is FAIR Isaac Corporation Score.

What is FICO Score ?

• FICO Score is a number having three digits and it represents your credit score that helps in determining your qualification for the financial product such as credit card and personal loan.
• The lender uses the FICO score meaning in determining how likely anyone can repay the loan.
• When you apply for a loan then lenders need some parameters to decide whether your loan application should be approved or not? This parameter is FICO Score.
• You can also think FICO Score as a summary of the credit report.
• FICO score is a parameter to measure how much credit you have and how long you have had credit.
• FICO Score also measures your available credit that is being used and you have paid on time or not?
• In short, we can say that FICO Score is a method of quantifying and evaluating the creditworthiness of an individual.

FICO Score Range

• The value of the FICO score range from 300 to 850.
• Range 670 to 739 indicates good credit history.

Who Creates FICO Score ?

• A FICO Score is a credit score created by FAIR Isaac Corporation.
• FAIR Isaac Corporation is an analytic software company that provides services and products to both businesses and consumers.
• FICO is a well-known software company in the field of producing consumer credit scores and these credit scores are widely used by financial institutions to decide the loan approval or lending money or issue credit to the consumer. 

Why FICO is needed ?

FICO Score is needed by both consumers and lenders. Here in this section, we have explained the the importance of FICO score for both consumers and lenders.

• FICO Score is not only useful for the financial institution but also useful for the consumers.
• FICO Score helps the consumer such as gain the access to the credit they need to do in their life such as get an education, buy a house, and medical expenses, Most of the insurance companies also check FICO scores at the time of setting up the services.
• FICO Score also helps the consumer to save their money in form of interest.
• FICO score also helps someone to measure the credit risk.
• If the FICO Score of the consumer is good then it becomes easy for the consumer to get the loan.
• FICO Score makes the Credit Decision fairer. Using FICO Score lenders can focus only on the facts which are related to credit risks. Other factors such as gender, religion, nationality, and marital status are not considered in credit score.
• FICO Score is also helpful for the lenders in identifying the consumers who are likely to perform well in the future.
• The use of the FICO Score helps in building the lender’s confidence to offer credit to more people and if they know the FICO Score value then They can easily understand the risk that they are taking on.
• Knowing and improving you FICO Score can also lead to more interest rate to the consumer.

Components of FICO Score

The Main Components of the FICO Score are as follow

1. Payment History 

According to the FICO Analytic Software Company, 35 % of your credit score is determined by your payment history.

Your Payment History contributes a lot to your credit report. That is why payment history is the most important factor.

It tells lenders whether consumers have paid past credit accounts on time.

Financial experts say that the best way to improve or maintain a good score is to make consistent and on-time payments.

If you can boost your payment history then your FICO Score will also be improved.

2. Amount Owed

This is the second important component of the FICO Score that helps in determining consumer credit utilization.

This component is used to compare the amount of credit you are using by the consumer and the amount of credit that is available for the consumer. These factors account for 30 % of your FICO Score.

You can also understand credit utilization in terms of the percentage of debt that you carry.

For example, if your credit burden is high then lenders can believe that your monthly income is going towards debt repayment.

If you want to improve this component then you require some strategic thinking.

3. Length of Credit History

This is the third most important component of the FICO Score.

The number of years or time you have been using credit impacts your overall FICO Score.

Length of Credit History contributes 15 % to your FICO Score. If your credit history is very short then it may contribute more to your FICO Score.

It is more difficult for new credit users to achieve a high score as compared to the user who has a credit history.

4. Credit Mix

Credit Mix is the fourth important factor that contributes to your FICO Score.

It Contributes 10 % of Your FICO Score. Until and unless your credit history is limited it is a relatively minor factor.

According to Financial Expert Kaufman “Credit mix is not a crucial factor in determining your FICO score unless there’s very little other information from which to base a score,”.

If you have multiple lines of credit open then you don’t need to worry about this component of the FICO Score.

In this case, you need to focus on your credit utilization ratio and improving your credit history.

 5. New Credit

The new Credit component of the FICO Score is determined by the number of lines of credit you have open recently. This contributes 10 % to the overall FICO Score.

According to Financial expert, Kaufman “Opening several new credit accounts in a short period can signify great risk—especially for borrowers with a short credit history,”

When you apply for a new loan, credit card then lenders look at your credit history. FICO considers only those credit checks that are made in the last 12 months.

What is FICO Score Ranges?

The value of the FICO Score lies between 300 to 850. Various Ranges of FICO score used to represent your financial status are given below –

Very Poor: 300 – 579

Fair: 580-669

Good: 670-739

Very Good: 740-799

Exceptional: 800-850

Conclusion and Summary

I hope now you have got the answer of your questions what is a fico score ? FICO Score full form and FICO Score meaning is now clear to you.

FICO score is one of the most popular credit scores and widely used scores by lenders to get information about the financial status of the consumer.

The importance and various aspects of the FICO score full form have been discussed in this article.