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The Curious Bag
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FICO scores attempt to summarize a borrower's credit history with one number. FICO scores range from approximately 375 to 900 points. Higher scores are considered to be better.
Three Credit Bureaus
The three credit bureaus are Equifax, Trans Union, and Experian. Each of these bureaus uses its own statistical models for calculating credit scores.
History
Fair, Isaac & Co. (FICO) started to develop the credit scoring system in the 1950s. In 1971, Congress passed the Fair Credit Reporting Act (FCRA), which gives consumers the right to view, dispute and correct their credit reports.
FICO Score Calculation
The Federal Trade Commission has ruled that it is acceptable for Fair, Isaac & Co. and the credit bureaus to not reveal exactly how FICO scores are calculated.
Factors
There are five factors considered in the FICO calculation--payment history, outstanding credit, length of time the applicant has been a credit user, new credit loads and mixed credit use.
Best and Worst FICO Scores
Borrowers with FICO scores of 680 or higher tend to get the best interest rates. Borrowers with FICO scores below 620 are considered to have "sub-prime" credit and tend to pay higher interest rates.
Source:
US Department of Commerce Minority Business Development Agency: Fair Isaac & Co. (FICO)
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