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Knowing Your FICO (Credit) Score Saves You Money**

FAMU Federal Credit Union is committed to its members understanding of  how to manage their FICO (It was first introduced in 1989 by FICO, then called Fair, Isaac, and Company) scores.  A strong FICO score can give you access to the best interest rates and loans, which ultimately can save you thousands of dollars! The FICO score is the best-known and most widely used credit score model in the United States.


Credit scores are designed to measure the risk of default on a loan by taking into account various factors in a person's financial history. Although the exact formulas for calculating credit scores are secret, FICO has disclosed the following components:



Other Factors than can adversely affect y our FICO Score


  • Any Court judgments or tax liens
  • Having newly opened consumer credit accounts


There are several types of FICO score: generic or classic or industry-standard, bankcard, personal finance, mortgage, installment loan, auto, and Next Gen score. The generic or classic FICO score is between 300 and 850, and 37.2% of people had between 750 and 850 in 2012. According to FICO, the median FICO score in 2006 was 723 and 711 in 2011. The FICO bankcard score and FICO auto score are between 250 and 900. The FICO mortgage score is between 300 and 850. Higher scores indicate lower credit risk.When you apply for a loan to buy a home, a car, or for a credit card, we need to assess the risk the credit union  is  taking by lending members money. FICO scores help determine your credit risk. The following example illustrates how a good FICO score can save you money on a 60 month $25,000 auto loan:





Monthly Payment

Credit RatingStatus

Additional $ cost of Loan


































The example shows how an individual with excellent credit will pay $3,822 less in interest (over the life of the loan) when compared to someone with bad credit.


To improve your FICO score, you should consider the following:


  1. Pay your bills on time.  Your payment history makes up the biggest part of your credit score.  Delinquent payments and collections can have a major negative impact on a credit score.
  2. Pay off debt rather than moving it around.  Don’t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may lower your credit score.
  3. Use less than 30% of your available revolving credit.  For example, if you have a $10,000 credit limit on a credit card, you never want to carry a balance over $3,000 because it can hurt your credit score. Never, ever, exceed your limit.
  4. Length of time using your credit card.  Older credit accounts with good credit history actually help you. It shows you managed credit well for a particular amount of time.


This is the first of several articles that will take a look at how FICO scores work.  We will discuss segments of how to manage your score in more detail.  Hopefully you will consider this as useful information. However, remember this information is readily available on the internet.   Your credit union is here to help you manage your financial needs.  Let us know how we can help.   If you have specific questions about your FICO score you can contact us here at the FAMU Federal Credit Union by emailing your question to Admin@FAMUFCU.com



** - The information in this article is taken from various internet sources.  Additional information can be obtained on this subject by inserting the term FICO in most search engines.