What is FICO? There are Two Answers.

Robin Hill Last Updated Jul 30, 2019 (0) comment , , , ,

what is fico

What is FICO?

There are actually two answers to this question “What is FICO?”

  • FICO the company, and
  • FICO the credit score

The Company (Fair Isaac Corporation)

FICO is an acronym for Fair Isaac Corporation. Engineer Bill Fair and Mathematician Earl Isaac founded it in 1956, hence “Fair-Isaac.” Fair and Isaac each invested $400 to start their company. They based it on the “principle that data, used intelligently, can improve business decisions.” (Fair Isaac Corporation, n.d.)

FICO’s first credit scoring system was born in 1958 for American Investments.


In 1961, the company moved its headquarters from San Francisco to San Rafael, California. In 2004 the headquarters was moved again to Minneapolis, Minnesota, but 2013 would bring another move back to California, specifically, San Jose.

Throughout its decades-long history, the company has rolled out innovative products like ASAP (the first automated application-processing system). This debuted with Wells Fargo in 1972 and was its first credit bureau risk score in 1981 (Fair Isaac Corporation, n.d.).

Purpose/ Reach

Essentially, FICO is an analytics software company, and its purpose is to provide a risk assessment that is based on a specific algorithm–the algorithm they have been developing over the last 50 years of the 20th century and continues to do today.

Its customer base consists of businesses in over 90 countries.

FICO Credit Score

Simply put, a FICO Credit Score is the term used to refer to FICO’s software. It is based on the information that the 3 major credit reporting bureaus: Experian, TransUnion, and Equifax provided.

Although your FICO score is not your only credit score, it is the one that lenders most widely use. Other credit scores are offered by VantageScore and TransRisk.

Different Credit Scores

FICO Score, VantageScore, and TransRisk differ in specific ways, but ultimately, they’re all based on a scale from 300 to 850. A VantageScore is usually for consumers who do not have sufficient credit history, or for whom the credit reporting bureaus cannot provide sufficient data. TransRisk is offered specifically by TransUnion. Of the three, FICO is the most widely used credit scoring model.

Also note, it has at least 3 basic types: FICO SBSS (Small Business Scoring Service) is for small businesses. There’s also a FICO Bankcard Score and FICO Auto Score. These two each focus and gear to a specific industry to assess loan risk for different purposes.

Remember, this is not an inclusive list. This is just a general overview of the different scoring algorithms that FICO offers its customer base.

Credit Reporting Bureaus

It’s important to note that all FICO credit scores are dependent upon the information provided in your credit report by the 3 reporting bureaus. Additionally, for each score, specific pieces of information will lower or raise your scores depending on the model being used.

Finally, these percentage points provided are not exact, and they will each vary depending on the scoring model used by the lender, and your overall credit profile.

Variable Percentage (rough estimate) Examples
Payment History 35% Your history of bill pay, on time payments, and late payments
Amounts Owed 30% How much you owe on any given credit account and your credit utilization
Length of Credit History 15% The age of your accounts, how long it’s been since your last used any given account, etc
Credit Mix 10% The credit you have broken down by type: Credit Cards, Mortgage Loans, Retail Loans
New Credit 10% Inquiries, and new accounts

(DeNicola, 2018)

Updates/ Versions

Like all software, FICO updates its algorithm and available products from time to time. The most recent version is FICO 9 which rolled out in 2014. However, specific lenders can choose to continue using older versions as updated versions are rolled out. This will have an impact on your credit score from lender to lender. Still, the changes are minimal as the main scoring model remains largely the same.


Basically, FICO is a company that provides an algorithm. That algorithm is the most widely used credit scoring model used by lenders today. The score produced ranges from 300 to 850 with higher being better. The algorithm used is a predictive model of risk based on specific factors and components contained within your credit report as it is produced by Experian, Equifax, and TransUnion.

Pre-Qualify For The Lowest Interest Rate

Get custom home loan advice from a mortgage expert today.

Get Started Here
FHA Loan Checklist Credit Check