By Sonya Sellmeyer, Consumer Advocacy Officer for the Iowa Insurance Division

credit score is a three-digit number to predict how likely you are to pay back a loan or mortgage on time.  Credit scores may be used to set an interest rate, terms for a lending agreement, and in calculating insurance premiums.

There is no single credit score, but the most popular source is FICO which stands for the Fair Isaac Corporation.  According to FICO, 90% of the U.S.’s top lenders use the FICO score as their risk assessment, and is used by the top three credit bureaus EquifaxExperian, and TransUnion.  A FICO score is determined by the information on a credit report, and since credit reporting may be different at each of the three reporting bureaus you may have a different FICO score at each bureau.

FICO scores are computed by weighing five different categories on your credit report with a weighted percentage: payment history 35%, amounts owed and available credit 30%, length of credit history 15%, types of credit used 10%, and new credit 10%.  FICO uses at least three different scoring models for different types of lenders such as mortgages and car loans.

According to FICO most scoring runs from 300 to 850, and the higher the number the better.  All averages are based on comparison with other U.S. consumers. 

Under 580:  Well below the average and demonstrates a risky borrower
580-669:  Below average but lenders do approve loans
670-739:  Near or slightly below average but considered a good score
740-799:  Above average and a dependable borrower
Over 800:  Well above average and an excellent borrower

A higher FICO score means a better chance at getting a loan or mortgage, and the interest rate and other fees may be lower. 

Ensure a healthy FICO score by managing your credit responsibly.  Pay bills on time and in full.  Checking your credit report, checking your FICO Score, or freezing your credit will not lower your FICO score. 

To find out your credit score check with your bank, lending institution, or credit card company.  There are also free credit score services, but understand the terms of their  service agreement before using.  The three credit bureaus and FICO also provide credit scores for a fee, or you may consult a non-profit credit counselor.  

According to the Insurance Information Institute, insurance companies may use a confidential credit-based insurance score when determining policy issuance and premium rates for home and auto policies. The credit-based score predicts insurance loss and is legally used by insurance companies, and is different from your credit score. 

Remember to run a credit report annually to check for errors in your credit history or to catch identity theft.  Federal law allows for a free credit report annually from each of the three credit bureaus.  Requesting a report from a different credit bureau every four months may be the best way to monitor your credit.

For more information about good financial habits, visit for free financial literacy information and courses.