What is FICO you ask?  Is it contagious?  The answer is: FICO score is a measure of credit risk developed by Bill Fair and Earl Isaac beginning in 1958.  FICO is a registered trademark of the Fair Isaac Corporation (FICO), founded in 1956 and headquartered in Minneapolis, MN.  And no, it’s not contagious.

FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The following percentages reflect how important each of the categories is in determining your FICO score:

35% Payment history

30% Amounts owed

15% Length of credit history

10% New credit

10% Type of credit used

It is the combination of these categories that determine your FICO Score.  No one category is more important or factor alone which determines your score.   The overall credit report information determines how these categories affect your score.  It’s impossible to determine how any single factor is important since it varies from different credit profiles and mix of information, which changes from person to person.

Lenders consider your income, work history, the kind of credit you are requesting and your FICO Score.  Late payments lower your score, but establishing or re-establishing a good track record of making payments on time will raise your FICO credit score.  The guidelines recently given by FICO are:

30 days late:                  40 to 110 point drop

90 days late:                  70 to 135 point drop

Bankruptcy:                  130 to 240 point drop

Foreclosure, short sale, deed-in-lieu:  85 to 160 point drop

So before you enter into any transaction, whether it’s buying a home or opening a credit card account, be prepared and know your credit score.

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