If you’ve ever applied for a personal loan, mortgage, or credit card, chances are you’ve heard the term “FICO score.” Many financial institutions and lenders look at your FICO score to gauge risk in approving your request for credit. Your score is used to decide whether to approve or deny your request for credit and determine your interest rates.

This article outlines everything you need to know about your FICO score: from what your score means, how it is calculated, and how to improve your score.

What is a FICO score?

A FICO score is a three-digit number calculated based on the information in your credit report. Scores range from 300 to 850 — the higher the number, the better your FICO score.

Your FICO score is a snapshot of the information in your credit report. It reflects how long you’ve had credit, how much credit you have, your payment history, and how much of your available credit you are currently using.

Developed by the Fair Isaac Corporation in 1958, FICO was the first credit scoring system in the United States. The score was designed to provide a fair, unbiased and consistent way to evaluate people’s creditworthiness. In 1991, the three major credit bureaus — Equifax, Experian and TransUnion — began using FICO scores.

When you apply for credit, use your score to assess your credit risk and how likely you are to repay a loan. 90% of all lending decisions in the United States are made using FICO scores.

What is a good FICO score?

FICO scores range from 300 to 850. The higher your score, the more likely you are to be approved for any loans and credit requests. A “good” FICO score is generally in the 670-739 range.

Here’s a breakdown of the different FICO score categories:

• Exceptional: 800 or higher
• Very good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 579 and under

Each lender has its own threshold for what level of risk they will accept and what they see as a “good” FICO score. Some lenders will deny any request for credit with someone with a fair or poor FICO score, and others may approve people with lower scores with stricter borrowing terms and/or a higher interest rate.

How are FICO scores calculated?

Your FICO score is calculated based on several key factors:

Payment history (35%): Your bill-paying history is one of the most important factors in calculating your FICO score. This includes your history of on-time and late payments on credit accounts, such as credit cards and loans. Public records related to non-payment are also factored into this category, such as bills being sent to collections, foreclosure, and bankruptcy.

Amounts owed (30%): This includes how much of your available credit you are using and how much you owe on credit accounts. Using a high percentage of your available credit can hurt your score.

Length of credit history (15%):  This is calculated by averaging the age of your oldest credit account and your newest account. Longer credit history is looked upon more favorably.

Credit mix (10%): Your credit mix reflects the types of credit accounts you have: installment loans (e.g., mortgage, auto loan) and revolving credit (credit cards). Having both types of loans can help improve your score.

New credit inquiries (10%): Recently opened accounts and new credit inquiries can influence your score. When you apply for a new credit card, for example, the lender will pull a ‘hard inquiry’ that can reduce your score for up to six months.

What is the difference between a FICO score and other credit scores?

FICO has several distinct versions of credit scores. The “base” score (FICO 8) is the most common and is used by most major lenders across multiple industries. There are also industry-specific FICO scores, such as FICO auto scores used for car loans and FICO bankcard scores used by some credit card companies. Lenders can determine which FICO scores they wish to use.

FICO isn’t the only credit scoring system available. VantageScore is another popular credit score that was developed by all three major credit bureaus. VantageScore uses a different algorithm to calculate credit scores, so your VantageScore may be different from your FICO score. VantageScore has four different iterations: VantageScore 1.0 and 2.0 ranges from 501 to 990. VantageScore 3.0 and 4.0 scores range from 300 to 850, like FICO.

How to get a FICO score

There are a few ways to get your FICO score:

Credit bureaus. Each of the three major credit bureaus, Equifax, Experian, and TransUnion, provide free credit scores upon request once every 12 months.

Credit card company/financial institution. Some credit card issuers provide free access to your FICO score on your monthly credit card statement or when you log in to your account on the lender’s website or app.

AnnualCreditReport.com. You’re legally entitled to free credit reports (including your FICO score) once a year from all three major credit bureaus through AnnualCreditReport.com. You can request them one at a time or all at once.

MyFico.com. Your FICO score is available (for a fee) from myfico.com, which calculates your score based on a general FICO model.

Personal finance sites. Some personal finance websites offer free “educational” credit scores online. The scores provided on these sites give you an idea of what your credit score is but may differ from the score a lender uses.

How to improve your FICO score

If you’d like to give your FICO score a boost, there are ways to bring it up, including:

• Review your credit reports. Take time to look over the details of each of your credit reports to check for inaccuracies and errors.
• Pay your bills on time. Late payments can put a major dent in your score.
• Low credit utilization. Your credit utilization refers to the amount of your credit limit you are using. Aim for 30% utilization or less to improve your score.
• Keep old accounts open. If you’ve paid off a credit card and don’t have any plans to use it, keep the account open with a zero or low balance.
• Experian Boost. This free service allows you to use your payment history on utilities, streaming services and other monthly bills to boost your score. This is particularly helpful for people with a low score or little to no credit history.
• Limit your requests for new credit. Each time you apply for a new credit card or loan, the lender makes a “hard inquiry” into your credit file which decreases your score for up to 6 months.