FICO Score? What the hell is that?

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FICO Score? What the hell is that?

Now I am firmly in the UK I have little use for a FICO score, I was however asked by one of my clients recently about this and what exactly it was.

So sitting here semi-bored on a Monday evening I have decided to write about the topic, you lucky people!

Warning bells

When I did live in the States I was occasionally contacted about this and told that my FICO score had changed,

You may not pay much attention to it ordinarily, but I’m usually very concerned by changes in the score as I’ve become the unfortunate victim of ID theft on two occasions. A bit of good news from this was that my family’s credit score actually went up believe it or not.


As a matter of fact, it’s almost at the top mark which is 850. So let me explain why this happened.

The reason why the score actually went up was because my borrowing amount was up and the repayments were also on time. We had an accident with our vehicle which was a right-off actually.

So we had to take out a cash loan to afford to buy a new car. As the loan from the dealer was interest free, this allowed us to make the new car purchase that we hadn’t expected to be able to actually.

So why did this quick online loan increase our score? Well, in the world of credit we live in today, actually borrowing a little more can indeed raise your score considerably. But that’s not the only thing to take into consideration here. Let’s examine a little further here to see just what we need (not just borrowing more) to make sure we can keep up a great credit score moving forward.

My personal view on borrowing

Personally speaking, I’m not overly keen on borrowing huge amounts of cash – Despite the fact that so many merchants would like to extend my credit to enable me to spend more. We need to decipher exactly what the most important things are about good credit and bad when it comes to borrowing money. As a basic rule of thumb, the lower the financial charge rate is, the higher your FICO will also be. Of course with any rule like this, it’s not always true.

So to look at it in another way; people who don’t pay back their debts consistently and who will have a lot of credit versus what they pull in from their salary are viewed as not so credit worthy as those who are diligent in their regular repayments and are never late.

So although the FICO exact scoring system is a well-kept secret, they say that about 65% of the score is derived from how much you really owe and how well you pay back your debts over time (your payment history). The other 35% will therefore come from new credit channels, and how mixed that credit is.