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Even though it may not be a term you’re proverbial with, the term FICO can be a shaping factor as to whether or not you meet the criteria for a credit or loan. But what is FICO, and how does it have an effect on you when it comes to your credit attraction?

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The short form FICO in fact stands for Fair Isaac Company, which was the company that initially produced a mathematical number for the credit reporting company Experian. FICO was planned as a tool that could be used by creditors to calculate the potential risks involved in letting somebody have the money. In reality, there are other similar models that have been developed by other credit bureaus, but all of their results are referred to by the industry as FICO scores.

FICO scores are calculated by probing the answers to number questions, based on the information in your credit and on your income to debt ratio. The responses to each question hold a certain number of points, and when all the answers are added up, that number stand for your FICO score.

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Your FICO score will depend upon such things as how long you’ve lived at your current address, what your job is, your income-to-debt ratio, how often you’ve been late on payments, how much debt you currently have, the amount of credit you’re using already, and the length of time you’ve had your credit established.

The most heavily weighted factors in determining your FICO score will be the current balances on your credit cards, having either too few or too many revolving accounts, the number of accounts you have that carry balances, how many accounts you’ve opened over the past twelve months, the length of time you’ve had your accounts, your past due accounts, and the number of credit inquiries that have been made in your behalf.

A good FICO score would be at least 650. If your score is 620 or less, you’ll be considered a risky candidate for a loan or credit card by potential creditors. A score between 620 and 650 will put you into a “possible” category, which means that you may need to provide more information to the lender before you’ll be approved for credit. A FICO score of more than 650 will put you into the “go-ahead” category, since it will show potential lenders that you’ve been a good credit risk in the past.

The higher your FICO number, the better, of course, since you will begin to get better interest rates on loans the closer your FICO number gets to 850.

It may not be a well-known number, but your FICO score can be important to your financial well-being.