What Does FICO Stand For

What does FICO stand for? FICO is an acronym for Fair Isaac Corporation. The company invented the FICO credit risk score, what many people commonly call their FICO score.

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Fair Isaac was founded in the 1960's. At that time, lending practices were not standardized and lenders based their decisions of whether or not to lend on various criteria including personal relationships with the borrower. Fair Isaac created somewhat of a revolution by pioneering the credit risk scoring methodology.

Fair Isaac scoring was a new approach for lenders. It allowed lenders to improve the way their business performed and gave them an expanded method of selecting consumers to provide credit to. Likewise, it helped more qualified consumers obtain the loans needed to buy homes, purchase vehicles and for everyday borrowing needs.

Today, the Fair Isaac Corporation is the industry leader in credit risk scoring. Lenders use FICO scores to determine the creditworthiness of consumers by purchasing a credit score from the company. The company states on their website that they have sold over 23 million FICO scores since the company started offering the service to consumers in March of 2001. The Fair Isaac Corporation is a publically traded company on the New York Stock Exchange under symbol FIC.

A FICO score is a number that reflects your credit history. It is calculated from a variety of different credit data on your credit report. Lenders use this score to determine the amount of risk lending to you would be. For example, someone with a low credit score has a poor credit history. This implies to lenders that the same habits and credit usage are likely to continue in the future. The lender may not extend credit to someone who has a low credit score because of the higher risk factor.

The FICO score is made up of five categories. These include the following.

• Payment History: This category includes the way in which you pay your bills. It includes payments to retail accounts, credit card lenders, installment loan lenders and mortgages. If there are any adverse elements on the credit report, such as bankruptcy or judgments, it is included here. Past due accounts, including the number and the length of time past due, are also included. Those accounts that are paid as agreed positively affect this category.

• Amounts Owed: To obtain a high FICO score you need to use credit, but use it wisely. The amount you owe on your accounts and the number of accounts with balances will affect the score. The amount of the credit line used is also important. The more available credit you have, compared to the amount of debt you have, affects your credit score.

• Length of Credit History: A FICO score is partially based on how long you have used credit. The age of accounts and the time since account activity can affect a FICO score.

• New Credit: New credit can be a positive thing, unless you open several credit lines at one time. The number of inquiries, or requests to look at your credit score, can also affect your score. On the other hand, if you are working to re-establish your credit history after a period of payment problems, this may affect your score positively.

• Types of Credit: To maintain a high FICO score, ensure you use a number of different types of credit. This includes credit cards, mortgages, consumer finance accounts and retail accounts. A good payment history on a variety of types of accounts will reflect in a positive credit score.

What does FICO stand for, for you? To learn more about your FICO score or what a FICO score includes, visit the company's official website, MyFico.com. Consumers who wish to know their FICO score will need to pay for it. To obtain a free copy of your credit report without a score, visit AnnualCreditReport.com. There, you may obtain a free copy of your credit report one time per year from each of the three national credit reporting agencies.

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