What Is a FICO Score and Why Does It Matter?

Your parents are shouting that their FICO score went up! You shout "hooray" to keep them company. You want your parents to think that you know what they are talking about, but your curiosity wins. You then ask them, "What is a FICO score, and why does it matter?"

High scores usually mean that the person wins. For example, a "perfect ten" is a score that gymnasts strive to achieve. A high FICO score means a person wins, too, but the prize is financial. The term FICO is an acronym for the group that created the FICO score, the Fair Isaac Corporation. Scores range from 300 to 850. Many people have scores in the 600 and 700s. A high score can help them get good loans for cars and houses. A FICO score affects a person when he or she wants to borrow money. Suze Orman, who wrote some New York Times bestselling books about managing money, calls your FICO score a "grade" of your credit. So, even adults have to worry about their grades.

At your age, you probably pay as you go for items that you want. If you want a new bike, you could save up your allowance until you have enough to buy it. When you get older, the items you want to purchase cost more. If you want to buy a house, you most likely will need to borrow money to do it. Houses usually cost over one hundred thousand dollars. Saving up for one to buy with cash is not practical for most people.

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