What Is a FICO Score and How Does It Work?

Your credit score is not just a number — it is a financial fingerprint that follows you into every major decision involving borrowed money. Understanding what goes into it, and specifically what a FICO score is, gives you the foundation to actively manage and improve it.

FICO Score vs. Credit Score: Not the Same Thing

A credit score is a broad term for any numerical model that evaluates your creditworthiness. A FICO score is a specific type developed by Fair Isaac Corporation, and it is the model that roughly 90 percent of top lenders use. FICO scores range from 300 to 850. A score above 740 is very good, above 800 is excellent, below 580 is poor.

The Five Factors That Build Your Score

• Payment History (35%) — A single 30-day late payment can drop your score by 90 to 110 points.
• Amounts Owed / Credit Utilization (30%) — Keep below 30 percent, ideally below 10 percent.
• Length of Credit History (15%) — Older accounts help. Closing your oldest card is a common self-inflicted score injury.
• Credit Mix (10%) — A mix of revolving and installment loans signals you can manage different debt types.
• New Credit Inquiries (10%) — Multiple applications in a short window signals financial stress.

What the Score Actually Measures

At its core, a FICO score is a prediction. It is trying to answer one question: how likely is this person to miss a payment by 90 or more days in the next 24 months? A high score says very unlikely. This is why payment history carries the most weight — missing payments is the most direct signal of credit risk.

Common Myths Worth Clearing Up

• Checking your own score does not hurt it — that is a soft inquiry
• Carrying a balance does not help your score — the myth that you need to owe money to build credit is false
• Closing old accounts usually hurts your score by reducing available credit and shortening history
• Income does not appear in your FICO score — it is not a factor in the calculation

How to Build Credit From Scratch

If you have no credit history, you can generate your first score in as little as six months. Start with a secured credit card backed by a cash deposit. Use it for one small recurring purchase and pay the balance in full every month.