Credit Score and FICO Score

Free FICO® Credit Score Estimator from FICO Developer

The United States has a very complicated credit system, and it is virtually everywhere. In the center of the system is a credit report, which is basically your entire financial history. You may be stunned by the amount of details it contains about your daily activities involving finances and money.

Based on your credit report, a credit score is calculated to represent your “credit worthiness.” Every lender - a credit card company, a mortgage lender or a bank – will almost certainly look at your credit score before granting you any type of loan or credit. The score will also directly impact how much interest you will be charged.

Needless to say, a credit score plays an important role in everyone's life. It is especially true for immigrants pursuing an American Dream, because many are not familiar with the credit concept before arriving in the U.S.

What is a credit score?

A credit score is a three-digital number that indicates your risk level in the eyes of a lender. A higher score means you will be more likely to pay back your debt. When you apply for a credit card, buy a house, lease a car, apply for a small business loan, set up utilities, or even rent an apartment, your credit score will be a key factor, among other things.

What is a FICO Score?

There are many types of credit scores available, but the dominant one that most lenders use is called Fico Score , developed by Fair Isaac. FICO has several categories, with the most popular one being FICO Classic. FICO 08, the newest product that removes authorized users from the formula, is set to be released in early 2008.

A FICO score ranges from 300 to 850. You can expect to receive the best interest and loan terms if your score is above 720 – 750. A fico score takes into consideration of your payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%). Race, nationality, religion, sex and marital status are not included in calculating your score.

How do I know what my FICO score is?

You can easily purchase your Fico Scores/Reports from the official website myFICO.com. Additionally, you can also buy your score from the three credit reporting companies: Equifax, Transunion or Experian. Just make sure you ask for a FICO score to avoid paying for something else.

Not ready to spend money but still interested in your score? Try this cool feature at myFICO:
Free FICO® Credit Score Estimator

Are there other types of credit scores?

Yes. In fact, there are many. Credit bureaus and many financial institutions have their own versions of credit scores, but they are in no position to rival FICO’s dominance. The only real threat is VantageScore, co-developed by three major credit bureaus. However, it is still too new to gain significant market shares.

Do I have a credit score if I am an international student or under H1B visa?

Yes. If you own a credit card you will definitely have a credit report, thus a credit score, whether you know it or not. Even without a credit card, your banking activities, payment to utilities bills, dealing with phone, internet or TV providers, may still be recorded.

How to improve my FICO score?

There are some general tips to increase your FICO credit score:

Pay your bills on time - the single most important factor to boost any credit score.
If you are already late, make it up immediately and don't wait for the next bill. The length of a late payment is also important.
Establish credit history early - especially important for new immigrants. Open up a credit card account as soon as you are qualified, but manage it responsibly.
Don't apply for too many new credits within a short period of time.
Keep credit card balance low, below 35% of your total credit.
If you need to cancel some credit cards, start with the newest ones. Transfer your credit limit to other cards from the same issuer first before closing them.
Dispute inaccurate charges through official channels. Don't ignore them, which may invoke a collection agency.
Check your credit reports regularly (twice a year at least) and correct any errors.