What is a FICO score? A FICO score is a generic term for a credit bureau score and specifically refers to the score derived from the FICO statistical model. A credit bureau score measures the relative degree of risk a potential borrower represents to the lender or investor. Each of the three credit bureaus has their own method, or statistical model, for calculating scores. The bureaus rely exclusively on their own data for calculating scores. The credit bureaus and their respective models are:

Fair, Isaac & Co. (FICO) began its pioneering work with credit scoring in the late 1950s. Since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrower’s credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable.

FICO scores vary from approximately 375 to 900 points. Higher scores are better. To get the best interest rates, you will generally need to score 680 or higher. If your score is at least 680, you are considered to have 'A' credit. If your score is below 620, you will generally pay a higher rate on your mortgage, and your credit is considered "sub prime." Depending on your score and credit, you may be considered a 'B', 'C', or 'D' credit borrower. If your score is between 620 and 680, based upon factors such as income, assets, employment, etc., the lender may decide into which credit category you fall. Presented below is a general guide, which can give you an idea of your credit ranking (A+ through E), based upon your credit score:

	Credit Score	Debt Ratio	Max LTV	Mortgage			Revolve			Install
				30	60	90	30	60	90	30	60	90
A+	680	36	95	0	0	0	2	0	0	1	0	0
A-	660	45	95	1	0	0	3	1	0	2	0	0
B	620	50	85	2	1	0	4	2	1	3	1	0
C	580	55	75	4	2	1	6	5	2	5	4	1
D	550	60	70	5	3	2	8	8	4	7	6	2
E	520	65	60	6	4	3	10	10	6	10	8	3

FICO scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how millions of people have used credit. Some of the predictive factors used in the models are found in the reason codes.

Reason codes are included in credit reports and help explain why a credit report scored as it did, the weight given to factors making up the score, and where a consumer should direct their efforts toward increasing their score. The reason codes and their respective weights are:
Late Payments, Collections, Bankruptcies--35%
Outstanding Debt--30%
Length of Credit History--15%
Types of Credit--10%
Inquiries (Applications for New Credit)--10%

How can I increase my score? While it is difficult to increase your score over the short run, here are some tips to increase your score over of time.
Pay your bills on time. Late payments and collections can have a serious impact on your score. Note that late payments, collections and bankruptcies are the most heavily weighted of the reason codes.
Reduce your credit-card balances. If you consistently have high balances on your credit cards, your credit score will be negatively affected. Note that this applies to the second most heavily weighted reason code.
If you have limited credit, obtain additional credit. Not having sufficient credit can negatively affect your score.
Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score.

Credit Reporting Agencies  Three agencies accumulate data on which to base your credit history. Their names, addresses and phone numbers are shown below. It is normally very difficult to speak to a live person at these agencies; instead, you are directed through a voice-mail maze, which will give you instructions on how to get a copy of your report, what it may cost, or how to deal with a problem you may have. In any case, it is better to communicate in writing. Use certified mail so you will get a receipt showing that the agency received your letter and when they received it.

EQUIFAX (formerly CBI) P.O. Box 105873 Atlanta GA 30348 (800) 685 1111

TRANS-UNION P.O. Box 390 Springfield PA 19064 (800) 961 8800 (800) 851 2674

EXPERIAN (formerly TRW) P.O. Box 8030 Layton UT 84041-8030 (800) 520 1221 (800) 682 7654

If several companies check my credit, will that hurt my score? That depends. The scoring system has changed to be more lenient in this regard. A few inquiries over a short period will not hurt your score. Mortgage lenders realize that when a borrower is shopping for a rate, more than one lender may investigate their credit.

What if there is an error on my credit report? If you see an error on your report, report it to the credit bureau. The three major bureaus in the U.S., Equifax (1-800-685-1111), Trans Union (1-800-916-8800) and Experian (1-888-397-3742). All have procedures for promptly correcting errors.