FICO

FICO is a mathematical model and a registered trademark of Fair Isaac Corporation. The full form of FICO is Fair Isaac Credit Organization. FICO is a tool, which is used by lenders to ascertain the creditworthiness of the borrower. The FICO score is a measure of credit risk. FICO score is used by most of the mortgage lenders.

FICO Scoring
FICO score is a credit score formulated by Fair Isaac & Co. Each of the three leading nationwide credit bureaus installs FICO scoring model in their own operating system in order to compute FICO scores for selling to lenders. Each of these bureaus refer to the FICO scores by a different brand name.

Experian uses the brand name as Experian /Fair Isaac Risk Model, Equifax uses BEACON and TransUnion uses FICO Risk Score, Classic.

Method of score calculation
Credit score is calculated on the basis of a series of queries. The queries are executed on the basis of individual’s credit report and his debt-to-income ratio. Each answer of those queries cumulates a certain number of points. These points are then summed up to find out the final score.

Factors considered during score calculation

Some of the important factors that are taken into consideration while calculating credit score are as below:
The length of time one spent at his current address
The amount of credit one is using
Profession of the individual
Late payments
Financial obligations (debt-to-income ratio) of the individual
Outstanding credit amount of the individual
Credit score: Someone who scores below FICO number 620, will normally be treated as very high default risk by the creditor. In that case, he is most likely be ineligible for the loan to be sanctioned. In the event he scores between 620 and 650, he will be under consideration and if he scores above 650, he is most likely be eligible for the loan with a low interest rate.

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