Fico Score® 8: What is it?

Quick insights

• FICO Score 8 is a credit scoring model used by many lenders to help determine your creditworthiness.
• Credit scores generated by FICO Score 8 consider several factors, including payment history, credit utilization and more.
• FICO Score 8 differs from FICO Score 10, which is another model that incorporates advanced technology and more robust data.

Your three-digit credit score can be calculated with several different scoring models. One of those credit scoring models, which is widely used by lenders, is FICO Score 8. In this article, we’ll detail what this scoring model is and how it works.

Understanding FICO Score 8

Developed by the Fair Issac Corporation (FICO) and introduced in 2009, FICO Score 8 is one of several versions of the FICO credit scoring model, but this version is widely used among lenders. This scoring model helps to determine a person‘s creditworthiness, which means their ability to repay their debts on time.

In general, FICO scores range between 300-850. Depending on which credit score category your number falls into, you could have a better chance of approval for new lines of credit and getting more favorable terms.

As of May 2024, the credit score categories for FICO includemyfico-credit-scores:

• Excellent credit: 800-850
• Very good credit: 740-799
• Good credit: 670-739
• Fair credit: 580-669
• Poor credit: 300-579

Remember, just because your credit score falls into a certain category, doesn’t necessarily mean you are “good” or “bad” at credit. Your credit score is just a small piece of the larger financial picture.

Factors that determine your FICO 8 Score

When calculating your FICO Score, there are key components that are taken into account. FICO Score 8 is calculated by weighing several factors. These include:

• Payment History (35%): This is the most significant factor in this model. Payment history represents your ability to consistently make your payments on time. It reflects late or missed payments as well as the presence of any defaults and delinquencies.
• Credit utilization (30%): Credit utilization refers to the percentage of available credit that you use. For example, if you use $1,000 of your $10,000 total available credit, your credit utilization ratio would be 10%. Keeping a low credit utilization ratio, about 30% or less, can help improve your credit score.
• Length of credit history (15%): The length of credit history consists of the age of your credit (the age of your oldest account), the average age across all your credit accounts and when you last opened a line of credit. The longer your age of credit history is, the better it is for your credit score.
• Type of credit (10%): Your credit mix or type of credit considers the various forms of credit you may have. These can include mortgages, credit cards and auto loans. The more diverse your credit mix, the better your chances may be of demonstrating wise credit management.
• New credit (10%): This is the number of recent hard credit checks that have been run during credit applications. Too many hard credit checks in a short period of time could pose a red flag to a potential lender.

Note that lenders review more than just your credit score when determining your eligibility and loan terms. For example, they can also consider your debt-to-income ratio, something that does not get accounted for in your FICO 8 credit score.

How is FICO Score 8 different from FICO Score 10?

FICO Score 8 and FICO Score 10 are both credit scoring models developed by Fair Isaac Corporation (FICO), but they have some differences. For one, FICO Score 10 includes trended data while FICO 8 does not. Trended data provides a more comprehensive view of a consumer’s credit behavior over time. This can help a lender predict a consumer’s habits and behaviors.

FICO Score 10 also weighs its factors slightly differently from FICO Score 8. For example, personal loans and credit utilization carry more weight in generating your FICO Score 10 than they do for FICO Score 8. Finally, FICO Score 10 incorporates several different advancements including updated technologies and algorithms to more accurately assess a person’s creditworthiness.

FICO Score 8, however, may be used more widely by lenders than FICO Score 10 due to its highly valued reputation and familiarity.

How do lenders use FICO Score 8?

Lenders use credit scores such as FICO Score 8 as one of several ways to determine your creditworthiness. Your credit score isn’t the only factor they consider—for example, your income, which isn‘t included in your credit score, is also taken into account when determining your eligibility, rates and credit limit. FICO Score 8 provides lenders a first snapshot of your level of risk and ability to repay your debts.

Lenders may use credit scores to assist them with determining your annual percentage rate (APR) in addition to your loan amount and terms. Depending on which credit score range your credit score falls into, you may be eligible for lower APRs, higher credit limits and get approved for more premium credit cards.

Note that it isn’t just lenders who look at your credit score. Potential employers, landlords and insurance providers may look at your credit score as well.

In summary

There are several credit scoring models out there, but FICO Score 8 is commonly used by lenders to determine your eligibility for credit and better understand your creditworthiness. It’s important to monitor your credit score, no matter which scoring model it comes from, as a way to stay informed and make the right financial decisions for you.