Fair Isaac Corporation, based in Minneapolis, Minnesota, was founded in 1956 by Bill Fair and Earl Isaac. They pioneered the field of credit scoring for financial companies. Over the years they have expanded their enterprise to cover decision systems, analytics, and consulting. Every credit reporting agency, and most lenders, calculate your credit score based on software from FICO®, a division of Fair Isaac, or based on in-house software modeled after the FICO® rating system. This rating system is meant to develop a snapshot of the risk you currently represent to a lender. Several parameters in your credit file, including length of credit history, number of open accounts, loans, mortgages, public records, and others are formulated to produce a three-digit score between 300 and 850. There are other scores used by lenders and insurance companies (some of which are developed by FICO®) such as Application and Behavior scores. These other scores take other information into account. Usually a lender will use a combination of your credit score with other factors when determining your risk. They all have the same objective, to determine the borrower's potential risk. Regardless of whether the score was generated by FICO® or a system based on FICO® parameters, they all yield an industry standard three-digit score. This score places the borrower in one of three main categories (we named the third one ourselves). Prime: If your credit score is above 680, you are considered a "prime borrower" and will have no problem getting a good interest rate on your home loan, car loan, or credit card.

Sub-prime: If your credit score is below 680, you are "sub prime", and will likely pay a much higher interest rate on your loan.

Shafted: Below 560 is the shafted score. At least that is how most lenders and credit issuers perceive it. You can still get a credit card but you will likely be hit with a security deposit or high acquisition fees. In addition to that, your interest rate may likely be between 15 and 23%. With this score, you can forget about most home loans and the majority of new car loans. Below 560 is no place to be. You may pay much, much more in higher interest and unnecessary fees. You may even pay more for your insurance rates. A very low score can even prevent you from getting a job with many companies.

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