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Why FICO Matters: A Lender’s Perspective

July 12, 2021 by  
Filed under Conversation

Why FICO Matters: A Lender’s Perspective

By Craig Kirkland, EVP/Director of Retail Banking, Nevada State Bank

Craig Kirkland, EVP/Director of Retail Banking, Nevada State Bank

Your FICO credit score is an essential part of your financial profile. A favorable score can lower your borrowing costs, help you purchase a car or a home, get financing to launch a new business, and help you build savings and long-term wealth.

FICO is an acronym derived from Fair Isaac Company, which developed the software that calculates your creditworthiness. Their actual algorithm is not known; however, we know that it includes your payment history, the debt you owe, the length of your credit history, new credit, and the kinds (mix) of credit you have.

Your score can range from 350 to 850. Scores below 580 are considered poor, 670-739 is considered good, and an 800+ score is exceptional. Approval for a bank loan generally requires a score of 670 or better. The average FICO score is just over 700.

The FICO formula reviews your credit reports from the three main credit bureaus — Experian, Equifax, and Transunion — and then spits out a number. That number is used by the vast majority of U.S. lenders to determine whether you will be approved for credit, as well as the rate, terms and fees of your loan.

Your FICO score can also be used by creditors, landlords, mortgage companies, government entities, insurance companies, utilities, and others. Some employers conduct credit checks as part of the hiring process, and a prospective landlord may pull your credit report and your score before renting to you.

One thing to note: FICO score measures borrowing activity for traditional forms of credit like bank loans and credit cards. It doesn’t account for rent payments or nontraditional financing that may not be reported to a credit bureau.

Underserved communities often face a disadvantage because the system doesn’t measure the ways they use credit.

If you’re serious about maintaining a good credit score, request a free copy of your credit report to see if there are any errors or discrepancies. Then, contact the agency where they appear and clear them up. Once a year, you can order a free copy of your report from

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