A FICO score is a number that represents a corporate view of how creditworthy a person is considered. Basically it tells the prospective lender this information: How likely I am I going to be reimbursed if I loan this person money? A higher number is good; it means a person has proven to be reliable in the past. A low number is bad; it could mean that person has failed to live up to previous obligations.

A credit score is based on an analysis of a person's credit report. The three major suppliers of credit market information in America are Equifax, Experian and TransUnion. A credit report score reveals potential risk that may come from lending money to the particular applicant. No creditor is eager to take on a high-risk candidate; someone with a bad credit score could be unlikely to repay a loan, which makes it more costly to do business.

FICO is an acronym for Fair Isaac Corporation, a company that created the model that is most commonly used to determine a credit score. The FICO score is primarily used by banks and corporations that provide secured and unsecured credit. Customers who have a low FICO score are less likely to have their loan approved or will be charged a high interest rate or required to put up additional collateral to close the loan.

While the FICO score is intended to show the likelihood that a borrower will default on a loan, the BNI (Bankruptcy Navigator Index) is used to determine the potential of a customer declaring bankruptcy.

The three credit bureaus use their own model to determine a credit score. Sometimes these figures will have a wide variance. They calculate a borrower's score by using their own proprietary formulas. The scores are periodically updated to reflect current consumer repayment rates.

Consumers are today eligible to obtain one free copy of their credit report from each of the three credit reporting agencies. The information is available at a government website (annualcreditreport.com) but does not include the credit score, although that information may be purchased. It is widely advised that individuals make a regular check of their credit report, which will enable a consumer to take action if an erroneous or fraudulent act is committed in their name.

The accuracy of FICO scores has been called into question over the last decade. The difference between borrowers who paid on time and those who default had increased. It is common today for banks to put more weight on a borrower's assets and employment before approving a loan.