FICO® Score: What It Is and How It Works

What Is a FICO® Score?

By Matthew Frankel, CFP – Updated Dec 14, 2025 at 8:28 PM EST

Key Points

Credit scores condense your report into a score aiding lenders' quick decisions.
FICO® Scores, most used in loans, range from 300 to 850; higher is better.
High FICO® Scores improve loan approval rates and terms, saving money.
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A credit score range from good to poor on a smartphone. — Image source: Getty Images.

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Demographics

Demographics are statistical characteristics of a population. They can include almost any descriptive trait, but the usual data points include gender, age, race, ethnicity, income and more.

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Consider this example. Let’s say that you want to buy a new car for $35,000 and that you want to use a 60-month loan to finance it. As of August 2023, a borrower with a FICO® Score of 750, which is in the realm of “very good” credit, could expect an interest rate of 7.44%, which would yield a monthly payment of $700.

On the other hand, a borrower with a “fair” FICO® Score of 650 could expect an interest rate of about 12.39% based on the national average, which would produce a monthly payment of $747.

This difference of $47 per month would add up to $2,820 in additional interest over the 60-month loan term for the lower-credit borrower. That’s why excellent credit can be such a valuable financial tool.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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