What's a FICO Score and How Does it Affect Student Loans?
March 10, 2021
FICO sounds familiar but what does it actually mean, and what strategies can you use to make sure it helps your student loans? We've got the breakdown right here.
A FICO score is the type of credit score that most lenders use to determine your creditworthiness. And your creditworthiness can determine what rates you get on lending products (or whether you are able to secure a lending product at all).
Why is it important and how can you make sure to get the best score possible? Read on to find out.
How is my FICO Score Calculated?
First, you actually have three FICO scores, not just one. Each of the three major credit bureaus (TransUnion, Experian, and Equifax) uses the FICO formula, developed by the Fair Isaac Corporation, to generate a unique credit score for you. Your three FICO scores may differ slightly based on each bureau’s proprietary data on your credit history.
Your FICO score can range from 300 to 850. You can use a free tool like Credit Karma to synthesize your credit scores and data from all three bureaus. Some services even offer your FICO score, gratis.
How Does my FICO Score Affect my Loans?
When you’re applying for a loan, your lender will most likely use your FICO to decide whether or not to lend to you. In some cases, applicants with high FICO scores will also be eligible to borrow at lower rates than applicants with lower FICO scores: if you have a high FICO score, you’re viewed as “less risky" by lenders, who may in turn offer you a better loan product.
Want to learn how to keep your FICO strong? Take CommonBond's informative credit quiz and make sure you’re not making any common credit mistakes that could hurt your FICO.