FICO credit scores are an important factor which can greatly affect your financial opportunities. Every time you apply for a loan, mortgage, or new credit card, the bank you are dealing with will use your credit report and FICO score to judge how likely you are to make your payments on time. The higher your score, the more likely you are to repay the loan on time and without any problems. Banks love people with good credit, and will reward them with lower interest rates and better terms on their loans.

What is the Average FICO Score?

The range in which all FICO scores are located is between 300 and 850. With 300 representing the lowest possible amount of credit, and 850 representing the best possible financial reputation. The average American FICO score is approximately 720. This average score is viewed as a good level of positive credit history and is seen, by banks and lenders, as a safe investment, resulting in good interest rates. Anything below the 600-650 mark will result in higher interest rates and more restrictive loans.

How is My FICO Score Calculated?

Your Fair Isaac Corporation Credit (FICO) score is the numerical result of a very complicated mathematical formula, in which all of your previous financial history is processed. The resulting number will become an exact representation of your financial reputation. There are several factors which make up the foundation of this score, such as, amount of current debt, over due bills, previous bankruptcy, credit cards, and several other factors.

The most important thing you can do to keep your FICO score high, is to make all of your monthly bill payments on time. However, even if you have a perfect financial history, you can still fall victim to errors on your credit report, such as, fraud and outdated entries. This is why it is very important, for people of all credit scores, to check their credit report at least once a year.