How Are FICO Scores Used?

A high FICO score indicates that you have healthy card balances and a low debt-to-income ratio, which compares the amount of money you owe in monthly debt payments to your take-home pay. Your FICO score changes as the information in your consumer credit report changes.

Function

Lenders, creditors, service providers, utility companies and employers use your FICO credit score to determine your creditworthiness and to qualify you for new lines of credit. Every time a company requests your credit information, an inquiry is documented on your credit reports.

Components of a FICO Score

Several components make up your FICO score, the most important of which is your payment history, which accounts for 35 percent of your FICO score. Credit utilization makes up 30 percent, whereas length of credit history comes in third, making up only 15 percent of your FICO score. The frequency with which you open new credit lines as well as the types of credit you have open each account for 10 percent of your FICO score.

FICO Score Percentile

A FICO score of 700 to 740 is very good. A median FICO score is 723 and a good FICO score ranges between 660 and 699. An average FICO score is 687. Anything at or below 620 is considered not good to poor with 500 being the lowest.

Considerations

If you have a poor FICO score, you may qualify for secure lines of credit. Back a secure line of credit with a high value asset such as a real estate deed. If you do not have the financial standing to secure a line of credit, apply for a line of credit with a creditworthy co-applicant. Your co-signer or co-applicant assumes full responsibility for the loan if you fail to meet the terms and conditions. Choose a co-applicant with a higher FICO score -- preferably 720 or above -- to improve your chance for approval.

Purchasing Your FICO Score

As of April 2011, FICO offers a $49.95 credit report and score product. Under the terms and conditions of the product, you can monitor your three FICO scores and credit reports (FICO, Equifax and TransUnion) as well as set up daily alerts for changes in your FICO score or credit report. For $19.95, obtain a copy of your FICO score and either an Equifax or TransUnion credit report.