The Average FICO Credit Score - What You Need To Know

Well, we know FICO scores range between 300 and 900 points, with an average FICO credit score of 720 points. We also know that credit reporting agencies calculate these scores using a software program developed by the Fair Isaac Corporation. The software considers various pieces of information contained within a person's credit report. It looks at both current and past information. Once the system gathers all this information, it then compares data about the credit status of millions of other Americans. Each record on file represents a person holding some form of credit. The system flags each of these records and assigns it with a credit score.

So, if you are the typical credit consumer, you would have an average score of 720 points. But this may not always be the magic number you can take to your local bank or lender and walk out with new credit. Although you may have an acceptable score, a lender may well have other credit scoring parameters which will mean that you still are not able to qualify for a loan with them. You may also discover that where one lender considers your FICO score to be acceptable, another may frown and demand more security to provide a loan.

Now how exactly does the FICO system calculate your credit score, what information does it use in deciding on your score. In other words, how does it judge credit worthiness among the millions of credit consumers out there? This is an important point because if the system does not get it right, you or someone you know can experience trouble when applying for credit. Of course, you can appeal the decision and have your lender take a closer look at your circumstances. But unless you know what makes up this important score, you are at the mercy of every lender you face. We know that the FICO scores results from statistical manipulation, let see what data it uses.

When assessing your credit worthiness, the FICO system looks at five different parts of your credit report. You can list these five factors as part of the FICO system but lenders use them differently:

  1. Your payment history
  2. Your outstanding balances
  3. How long your credit history runs
  4. Any new credit you may have and
  5. What types of credit you use.
Your FICO credit score can vary dramatically depending on the credit transactions you are carrying out. But you can keep an acceptable score by paying all your bills on time, as well as reducing the balances you have on any credit cards. Also it is important that you do not apply for credit with various lenders too often, as all these factors can easily cause your score to go down.

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