by Andrew Smeja

Created on: November 18, 2009   Last Updated: November 20, 2009

Fico is the ticker symbol for the Fair Isaac Corporation. For those of you who don't know, a ticker symbol is usually a shortened version of a companies name that refers to a stock. For example, if you wanted to buy shares of the Pepsi company, you would buy shares of PEP (PEP is Pepsi's ticker symbol). In 1958 the Fair Isaac corporation began creating a credit scoring system for banks, so that banks could make better decisions in whether or not to extend credit to individuals. The system they created is now what is referred to as a "Fico score".

Well, the question I'm sure your asking yourself is, why should I care if I have a low Fico score? I don't plan on getting a loan, so it shouldn't matter if I have bad credit. Well, if you plan on getting a job think again. Many employers will use Fico scores to decide whether or not they are going to hire you. Paying your bills on time (which is reflected in your Fico score) is a sign of responsibility and good financial sense. Until an employer hires you he really has no idea what kind of person you are, but if he checks your Fico score he can at least know whether or not your the kind of person that pays their bills on time and has their stuff together. That is the kind of person most companies are usually looking to hire.

The next, and more obvious reason why your Fico score matters is credit. A lot of people can't reasonably buy everything they want with cash. They are willing to buy things on credit, using either a loan or a credit card. Often times this is necessary, like if your car broke down and you needed to get to work, but didn't have enough money on hand to get it fixed. Both loans and credit cards have one thing common, they will use your Fico score to determine your interest rate. A low score could mean a higher percent interest, which can be quite a bit of money if you buy a lot of things on credit, especially if you pay them off over long periods of time. On the other hand a high score could mean a lower interest rate, making it easier to manage your payments, and saving you money over time.

Fico scores can be as low as 350 or as high as 800. The average Fico score is about 720. A Fico score of more than 700 is considered good. Anything below 620 is considered on the low side. A score below 580 is considered to be very bad. So, I'm sure the next question your going to ask is how you can improve your Fico score.

The best way to raise your Fico score is to pay off your debt early. Never make the minimum payments on a credit card or loan, always use whatever extra money you think you can spare to pay off your credit card. Chances are whatever you were going to do with your money. you weren't going to earn a good interest rate on, think of paying off your debt as an investment. The next thing you need to do is pay your credit card bills on time, you get charged fees for late payments and it reflects poorly on your Fico score.

The next big factor is how long you have had your credit card. If you have been using credit for a long period of time and have been responsible with it, this will reflect well on your Fico score. Large numbers of inquiries on your Fico score over a short period of time will lower your Fico score. Your Fico score is checked every time you get a new credit card. Frequent Fico score checks can be an indicator that someone is about to take out several credit cards at once.

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