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Nov 18, 2022
4 min read
Last update: May 17, 2024

Everything You Need to Know About FICO Scores

What is a FICO Score?

A FICO Score is a type of credit score that was developed by the Fair Isaac Corporation (FICO). It is a three-digit number (generally ranging from 300-850) that is used to determine a borrower’s creditworthiness when applying for various types of loans. The higher the score, the better the applicant’s credit and the lower the risk to the lender. Oftentimes, a higher score translates to better terms, lower rates, and more funding options for the borrower.

While there are other types of credit scores, FICO Scores have become the industry standard and are used by over 90% of lenders. You may be surprised to learn that you can actually have several different FICO Scores. Even though each of the 3 major credit reporting bureaus (Equifax, Experian, and TransUnion) use the FICO Score algorithm, the information they collect can vary slightly resulting in some small differences. Additionally, because some industries look at different criteria to determine creditworthiness, there are some industry-specific FICO Scores that are used by auto lenders and credit card issuers.

How is My FICO Score Calculated?

FICO uses 5 factors when calculating a score. The percentages listed below reflect how important each of the factors are in determining how your FICO Score is calculated. Payment history, for example, weighs more heavily than new credit.

The 5 factors are:

  • Payment History (35%) Do you have a history of late payments? Or do you pay your bills on time?
  • Amounts Owed (30%) How much of your available credit are you currently using? Your credit utilization ratio plays a large role in determining your FICO score.
  • Length of Credit History (15%) How long have you had your various credit accounts and what is their average age?
  • New Credit (10%) Have you recently opened up several new credit cards? Have there been any new inquiries on your credit report in the last 12 months?
  • Credit Mix (10%) Do you have a good credit mix (i.e., multiple types of credit like a mortgage, a car loan, and credit cards)?

How to Check Your FICO Score for Free

The 3 major credit reporting companies (Equifax, Experian, and TransUnion) are required by federal law to provide you with a free personal credit report every 12 months. You can request yours from Depending on your preference, you can either choose to request credit score reports from all 3 agencies at once, or you can decide to order one at a time.

Have a Low FICO Score?

Improve your score by:

  • Continually Monitoring Your Credit Reports and Disputing Errors
  • Paying Your Bills on Time
  • Reducing Any Debts That You Owe

Check out our recent blog post, for step-by-step instructions on how to repair bad credit.

Don’t Have a Great FICO Score, but Need Capital for Your Business?      

We understand that there’s so much more to you and your company than your FICO score. At SBG Funding, we look at many different factors such as time in business, cash flow, age of a company, and annual revenue. Your credit only plays a role in determining which products you are approved for and what the terms of the loan will be. A typical bank only approves 15-20% of business loans, while SBG Funding has an 85% approval rate!

Ready to get started? Contact us today to learn more.

How do FICO scores differ between industries, such as auto loans and credit cards?

While the standard FICO Score is used across multiple industries, there are industry-specific FICO Scores designed to cater to the unique needs of certain sectors. These specialized scores consider the specific risk factors associated with the industry in question, such as auto loans and credit cards.

FICO Auto Score, for example, is tailored to evaluate the creditworthiness of borrowers in the auto lending industry. This score places more emphasis on factors like payment history for auto loans, outstanding balances on auto loans, and the borrower’s overall experience with auto credit.

Similarly, FICO Bankcard Score is designed for the credit card industry, giving more weight to factors like credit card utilization and payment history on credit card accounts.

Are there any business funding options available for those with lower FICO scores?

Yes, there are business funding options available for entrepreneurs with lower FICO scores – SBG Funding creates opportunities for business owners with bad credit scores to help them thrive and stay afloat. Alternative lenders and online funding platforms often have more flexible criteria when assessing creditworthiness.

These lenders may consider factors like business revenue, cash flow, and the age of the company, rather than relying solely on the owner’s FICO score. Some options for business owners with lower FICO scores include:

  1. Merchant cash advances
  2. Invoice factoring
  3. Equipment financing
  4. Short-term loans
  5. Business lines of credit

What steps can I take to improve my FICO Score in the short term and long term?

Short-term steps to improve your FICO Score:

  1. Pay all bills on time, as payment history is the most significant factor in your score.
  2. Lower your credit utilization by paying down outstanding balances on credit cards.
  3. Request a credit limit increase from your credit card issuer, which may lower your utilization ratio.
  4. Dispute and correct any errors or inaccuracies on your credit report.

Long-term steps to improve your FICO Score:

  1. Maintain a healthy mix of credit accounts, including installment loans and revolving credit.
  2. Avoid opening too many new accounts in a short period, as this may signal higher risk.
  3. Keep old credit accounts open, as a longer credit history contributes positively to your score.
  4. Monitor your credit report regularly to ensure that all information is accurate and up-to-date.

There are multiple strategies for business owners to improve debt repayment process, especially when multiple debts are in play. Debt Snowball or Debt Avalanche methods are popular and rewarding strategies to implement.

What are the main differences between FICO Scores and other types of credit scores?

FICO Scores are the most widely used credit scores in the United States, with over 90% of lenders relying on them to assess a borrower’s creditworthiness. Other types of credit scores, such as VantageScore, also exist and are used by some lenders and credit bureaus.

The main differences between FICO Scores and other types of credit scores include:

  1. Scoring models: FICO Scores and other credit scores use different algorithms to calculate credit risk. While both models consider similar factors, such as payment history and credit utilization, they may weigh these factors differently.
  2. Score ranges: FICO Scores typically range from 300 to 850, while other credit scores like VantageScore may have different ranges. This variation means that a specific score might be considered excellent under one model but only good under another.
  3. Data sources: FICO Scores and other credit scores may use different data sources or emphasize different aspects of a borrower’s credit history. For example, FICO Scores place more importance on payment history, while VantageScore may emphasize the age and types of credit accounts.
  4. Adoption rate: FICO Scores are the industry standard, used by the majority of lenders in the United States. Other types of credit scores are less widely adopted, although they may still be used by some lenders and credit bureaus.
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