FICO, short for Fair Isaac Company, is a privately owned corporation which specializes in analyzing information for the purpose of predicting the most likely outcome. This is also known as “Predictive Analytics”.
When it comes to credit scores specifically, FICO takes into consideration a number of different factors from your credit report, and uses it to generate a score which is a guide for lenders as to what risk is involved with lending to a particular individual. Most lenders will use a FICO score to determine whether they should extend a new loan or line of credit to you, and existing credit lines will use this score to determine whether you qualify for an increased credit limit.
FICO Scores are also used in many less obvious areas related to ones credit, including, what accounts may be included in a bankruptcy, and which accounts may be more profitable. a FICO score can also be used in some cases to determine ones likelihood of filing an insurance claim, and therefore, their home and auto insurance rates.
Who Is FICO?
The Fair Isaac Company, or FICO, is not a credit reporting agency, they are a risk analysis company. The company generates a score for lenders which indicates the risk an individual borrower may present based on their likelihood of late or missed payments or total default. The information that FICO uses to generate this risk score is obtained through the three major credit bureaus: Equifax, Trans Union, and Experian.