What Is Considered a Very Good FICA Score?

Having a solid credit history and therefore a good FICO credit score is often the key to getting a loan or home mortgage approved. Even when a lender approves you, you'll pay lower interest rates if you have a very good FICO score. There's no hard and fast rule that says a particular score is good (or bad), but there is a general consensus about what constitutes a good FICO score.

Identification

A FICO score is a number generated by processing the information on your credit history. The meaning of a FICO score is straightforward: it summarizes the risk lenders take if they extend someone credit. The name FICO refers to Fair, Isaac, & Co., the company that markets the scoring system. A FICO score can range from a low of 300 (bad) to 850 (a perfect score). All three major credit bureaus (Equifax, Experian and TransUnion) use the FICO scoring system.

Good Scores

The median FICO score in the United States is 723 (as of 2010) and is considered good. According to the Consumer Federation of America, "in the eyes of most lenders, FICO credit scores above 700 are very good and a sign of good financial health." Lenders reward consumers with really high scores (in the upper 700s) with the very best interest rates.

Lower Scores

When a FICO score falls below 700, lenders start to have greater concern about the risk that they won't get their money back. Scores ranging from 620 to 690 indicate greater risk and most lenders will charge higher interest rates to compensate. A FICO score below 620 is considered "subprime" (poor) and many lenders will decline to extend credit. Quite often someone with a subprime FICO score can only obtain financing at very high interest rates or by going through an agency like the Federal Housing Authority.

Features

The exact method used to compute a FICO score is kept secret by Fair, Isaac, & Co. However, the makeup of the score is public knowledge. Thirty-five percent is based on timely payment of bills and another 30 percent on a person's total debt compared to their income. Types of debt are weighted differently (a mortgage is viewed as being lower risk than a much lower amount of credit card debt, for example). The type of debt also counts another 10 percent, with excess unsecured debt being viewed as higher risk. Stability in a person's credit use is a factor. Ten percent is based on how often you apply for credit or close existing accounts. The last 15 percent is simply time: how long you have used credit responsibly.

Safeguard Your Credit

Once you've demonstrated you are a good enough credit risk to receive a very high FICO score, you want to protect it. Take advantage of your rights under the Fair Credit Reporting Act. You can request a free copy of your credit history each year from each major credit bureau. The FTC authorizes only one company (AnnualCreditReports.com) to provide these free reports. If you find incorrect information, you can file a dispute to have the information corrected or removed. All three credit bureaus have online tools to file a dispute. The FTC publishes consumer dispute guidelines online.