FICO is an acronym for Fair, Isaac and Company or simply Fair Isaac. The phrase FICO credit score refers to a mathematical model for determining a person's creditworthiness based on a formula developed by this company. Even though the term FICO is a registered trademark of Fair Isaac, the expression FICO credit score is used rather loosely to generally refer to a person's credit rating.

The FICO Model

Basically a FICO credit score is a rating of how well a person manages their debts in comparison to the rest of the population. The statistical model examines a person's payment habits and tries to identify patterns that might indicate an individual's predisposition toward defaulting on a loan or filing bankruptcy. The FICO credit scoring model only takes into account information that is contained in the person's credit report.

There are a few items in the credit report that affect the FICO score more than others. For instance, regular on-time payments positively impact the score. The model also examines how the individual uses credit, considering such things as how close to the maximum limit on their credit cards they are.

The length of the person's credit history, number of new credit lines they have tried to obtain, and the types of credit the person has go into the mathematical equation as well. The scores calculated by the FICO model ranges from 300 to 850. The higher the scores the better, and anything above 660 pretty much guarantees loan or credit approval at a prime interest rate.