What Is a FICO Score and Why Should You Care?

When you apply for a credit card, a mortgage, or even a phone plan, the lender will ask for a number that sums up your credit health. That number is your FICO score. It’s not a magic number – it’s a snapshot of how you’ve managed debt in the past, and it influences whether you get approved and what interest rate you pay.

How the FICO Score Is Calculated

FICO uses five main buckets to work out your score, which ranges from 300 to 850. Here’s a quick breakdown:

• Payment History (35%): Did you pay bills on time? Missed or late payments pull the score down fast.
• Amounts Owed (30%): This looks at how much you owe compared to your credit limits. High balances, especially near the limit, hurt your score.
• Length of Credit History (15%): The longer you’ve had accounts open, the better – as long as you’ve used them responsibly.
• New Credit (10%): Opening several new accounts or hard inquiries in a short time can signal risk.
• Credit Mix (10%): Having a blend of credit cards, loans, and mortgages shows you can handle different types of debt.

Each factor is weighted, so a missed payment can outweigh a long credit history, but paying down balances can quickly improve the score.

Practical Steps to Boost Your FICO Score

Improving a FICO score isn’t a mystery. Try these actions and watch the numbers climb:

1. Pay on time, every time. Set up automatic payments or calendar reminders. Even one late payment can drop your score by 100 points.
2. Keep credit utilization under 30%. If you have a £5,000 limit, try not to carry more than £1,500 on the card.
3. Avoid closing old accounts. An old account adds to the length of your credit history. Keep it open, even if you don’t use it often.
4. Limit new credit inquiries. Each hard pull stays on your report for two years and can shave a few points.
5. Check your credit report for errors. Mistakes happen. If you spot a wrong late payment, dispute it with the bureau.

These moves don’t need a credit wizard. Consistency over months is what lifts the score.

Knowing your score is the first step. You can get a free FICO score from many banks or from annualcreditreport.com (US) – in the UK, check with Experian, Equifax, or TransUnion. Review it regularly so you catch any surprise drops early.

Remember, lenders look at the full picture, not just the number. A solid FICO score opens doors to lower interest rates, better loan terms, and even more negotiating power with lenders. Keep the habits simple, stay on top of payments, and let the score work for you.