What is FICO?

Almost every consumer and business has heard of Fair Isaac Corporation
(FICO); the question is: who is FICO?  Since 1956, FICO has provided
decision management and measurement systems. The company was founded
by mathematician Earl Isaac and partner, Bill Fair. Later, the FICO
score was created enabling the company to climb to the position of
leading provider of decision management, fraud detection and most
famously, credit scoring.

Before credit scores, some lenders would send agents to
surreptitiously record personal information on aspects on: religion,
sex, race living habits, etc. The FICO system was created to minimize
discrimination in the business world. Thanks to legislations like the
Equal Credit Opportunity Act and the Fair Credit Reporting Act, only
statistical factors determine your ability to be a low risk consumer.
FICO keeps the exact formula for their scores locked up tight for
several reasons.

The Fair Isaac Corporation is a business like any
other; to give away their cherished formula is comparable to giving
away a secret sauce formula. Not only would it be bad for business but
if consumers knew the formula, it would be easier for consumers to
cheat the system. Though the company does not give a specific formula,
the company does provide the public a general outline and percentage
of the factors included in the formula. Some factors in the FICO
scores are: Payment history, length of history, amounts owed, types of
credit used and new credit. Some criticize the formula because it
doesn’t include one’s income which many consumers believe should be an
integral part to their score, especially while layoffs are at a high.

How do you maintain a good FICO score and repair your credit? Fair
Isaac Corporation typically advises consumers to pay their bills on
time and keep them at a low to mid-low balance, limit the numbers of
inquiries on your credit and dispute any possible inaccuracies on your
credit report.