If you are thinking about buying a home or financing some other major purchase you have probably heard of FICO scores. You've probably also wondered what a good fico score might be. While FICO scores do provide a means for comparing one individual's credit profile against another's, "good" means different things to different people and financial institutions depending on the circumstances.  One lender might offer better interest rates to people with FICO scores above 675 while another might require a score of 725 or higher to get a better rate.

When you apply for a mortgage or other loan, lenders are always looking to see whether you would be a good investment for their available funds. Lenders will almost always consult your FICO score. The Fair Isaac Corporation created the credit scoring system which has come to be commonly known as your FICO score. This score represents an analysis if your current credit profile that results in a score which assesses and predicts the level of risk you pose to a lending institution. If your score is below a certain number you will likely not be approved for financing, and if your score is good you will be extended a loan. If your score falls somewhere in between or close to the average, you may be offered a loan but with higher than the best available interest rate or less than the most favorable terms.

What is a Good FICO Score?
This is a common question that is asked by consumers who are wondering whether they may qualify for a new loan or be eligible to refinance an old one. According to recent data released by the Fair Isaac Corporation, the average American's FICO score is 723. However, the range can be anywhere from 300-850. Very few people achieve a perfect score of 850 and similarly, very few people ever achieve the lowest score either. A poor score is generally considered to be anything under a 550, so ideally anything over that would not immediately disqualify you from obtaining credit, but several other factors in combination with your FICO score determine whether or not a lender will approve your loan application.

Why FICO Scores Matter
When you want to be approved by a lender for a loan, you not only need to learn your FICO score and what it might mean to your chances of acquiring financing, but you also need to know why this matters. The three main credit bureaus collect all of the pertinent information about your credit dealings and this data is used to compute your FICO score. This score is so important, because it is one of the main determining factors in whether you get approved for a loan or not. Although a bank or other lender may look at additional factors and circumstances to determine your eligibility for a loan, the FICO score will be one of the primary things they consider. That is why it is essential to keep your overall score as high as possible at all times if you are interested in buying a home or considering a major purchase now or in the near future.

Ultimately, a high FICO score will allow you to get approved for the loan that you want. There are many other things, however, that having a good FICO score can do for you as well. Most car insurance companies now pull your credit report and base their rates in part on what a customer’s credit profile looks like. A higher credit rating will ensure that you get a lower rate on car insurance, provided you haven’t had any recent accidents. Some employers check your credit and will not hire you without a satisfactory or high score either. This is particularly true for Financial Services jobs and other jobs where embezzlement could potentially occur. A high FICO score can also help you garner the best interest rates on loans and can ensure that you get the best deals on credit cards as well.

As you can see, there are many reasons to learn about your FICO score and the factors that influence it.  The bottom line is that having a good FICO score opens doors.  Asking yourself what is a good FICO score and how does mine compare is the first step in cleaning up your credit report and getting your finances in order if necessary.