What The FICO: How 3 Digits Control Your Life

Your three-digit score affects anything from buying a home to getting a new credit card.

What The FICO: How 3 Digits Control Your Life
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Creditworthiness is key to borrowing money at reasonable rates.

We all have credit scores, even if we don't know where in the blue blazes they come from. The scores tell lenders how likely someone is to pay back a loan on time. To do that, almost every bank depends on something called a FICO score.

FICO's website says 95 percent of financial institutions are their clients, 100 billion scores have been sold, three-fourths of home loans are based on their insights, and we know that most states allow potential employers to screen applicants by their credit history. So what is this company with so much control over your life?

FICO's been around since 1956. The company says that "Engineer Bill Fair and mathematician Earl Isaac" created the Fair Isaac Corporation "with an initial investment of $400 each — on the principle that data, used intelligently, can improve business decisions." In other words: give money to the right people at the right interest rate. 

Essentially, we're talking about an algorithm pulling together disparate data and creating individual profiles.

Here's what we know is in the black box, from FICO itself

-The biggest factor is your payment history of past bills (35 percent).

-Then, amounts you owe today (30 percent).

-A few more: length of credit history, new credit and your mix of credit.

The company points out that for young people with shorter histories, the weights can be shifted around.

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Here's what's not in your score. FICO doesn't factor in:





-Marital Status



-Anything not deemed "predictive" of ability to pay

And FICO scores come in more varieties than Baskin-Robbins.

Forbes writes: "Fair Isaac has introduced more than 60 FICO scores since 2011." So if you’re going in to buy a car, they'll pull the "FICO Auto Score" or for a home, the "Base FICO Score."

They say most of these are fairly similar but deviate in minor ways. If you want your FICO score, you can pay for it, while the scores you find on most sites are considered "educational," not precise duplicates of the end-all-be-all number used by banks.