How to Interpret the Fair Issac Credit Report Score

The Fair Isaac Corporation computes consumer scores using an intricate computing system that rates credit worthiness. The three national consumer credit reporting bureaus report consumer reports and scores, so consumers, creditors, lenders, employers and other approved parties can obtain the most accurate reading of a person's credit and bill paying history. Interpret a Fair Isaac credit score the right way, so you know how you fare as a consumer and what this means for your credit applications.

Instructions

1

Purchase a comparison of your three credit reports and scores from the three national consumer reporting bureaus: Experian, Equifax and TransUnion. Experian's website reports that you can obtain all three credit reports and scores for $40. TransUnion reports a similar three-bureau report product for $29.99; however, only New York residents receive free credit scores as of November 2010. Experian's website reports three-bureau reports with and without credit scores for $39.99 and $29.99 respectively.

2

Educate yourself on how a FICO score is determined. Understand that your payment history accounts for the largest portion of your credit score, at 35 percent. Debts owed make up 30 percent of your credit report, whereas your credit history makes up 15 percent. The types of credit you currently use and the rate at which you open new lines of credit account for the smallest portion of your credit score, at 10 percent.

3

Look for a three digit number ranging from 300 to 850, with 850 being the highest and most favorable and 300 being the lowest and least favorable.

4

Determine your delinquency rate. Credit scores between 300 and 499 have a delinquency rate of 87 percent, which is the least favorable of any credit score range. Credit scores between 500 and 549 drop to 71 percent, whereas credit scores between 550 and 599 and 600 and 649 dip to 51 and 31 percent respectively. Scores between 650 and 699 have a 15 percent delinquency rate. The most favorable scores -- which span between the 700 and 749, 749 to 799 and 800 to 850 -- report the lowest delinquency rates, with 5, 3 and 1 percent respectively.

5

Compare your credit score to the national prime rate, which is the benchmark at which banks set interest rates for consumers with the most favorable credit rating. Find the national prime rate at Wall Street Journal Prime Rate's website (see Resources). Check daily or weekly for the most current updates.