Average FICO Score
In 1956, Bill Fair, an engineer, and Earl Isaac, a mathematician founded the Fair Isaac Corporation (FICO) to provide consulting services and decision management systems. As part of their service they developed the FICO scoring system, which measures the risk inherent in a business decision, such as a loan on credit.
The FICO score analysis has become such a highly respected means of determining risk that all the largest consumer credit reporting agencies in the United States and Canada base their reports on an individual’s FICO score compared against a nationwide average FICO score. They even registered the term, FICO, as a trademark for the Fair Isaac Corporation, which is headquartered in Minneapolis, Minnesota.
Fair Isaac’s customers cover the financial spectrum from mortgages to cellular telephone service so it’s pretty hard to land a consumer loan of any kind without your own FICO score being compared against the national average FICO score. This is one reason credit ratings have become such a hot topic in recent years.
Without naming names, here is a quick run-down of some of the lenders who use the average FICO score system to approve or deny loan applications:
- 1,400 financial service providers that include
- 99 out of 100 of the top-ranked banks in the US
- 49 of the 50 best global banks
- 200 retailers
- 9 out of 10 top US retail credit card issuing companies
- More than 100 providers of global telecommunications services, including
- The 10 biggest wireless providers in the US
- 6 of the top 10 global telecommunications service providers.
Basically, everybody’s comparing your average FICO score against all others to assess the risk of you defaulting on your loan or service contract so it’s good to pay bills on time, keep the income rolling in, and monitor your credit scores, including your FICO score.
FICO scores range from 300 to 850, with a median of 723 instead of an average FICO score. The median means that half of all people score above 723 and half score below 723. Actually, about 60% of all credit scores fall in the range between 650 and 799.
To determine an individual consumer’s average FICO score, the criteria is evaluated as follows:
- 35% punctuality of payment
- 30% total indebtedness
- 15% credit history length
- 10% credit type, such as installment, consumer finance, and revolving
- 10% number of times recent credit has been applied for