As interest rates rise and consumers feel the pinch in their pocketbooks, your credit rating becomes a more important part of your financial health -- and no credit rating is more important than your FICO rating.

A FICO rating is a credit score developed by Fair Isaac & Co. to determine the likelihood that you will pay your credit bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, FICO scoring has become widely accepted by lenders as a reliable means of credit evaluation.

There are really three FICO scores computed by data provided by each of the three bureaus -- Experian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score.

A FICO credit score attempts to condense a borrower's credit history into a single number.

Fair, Isaac & Co. and the three major credit bureaus do not reveal how these scores are computed, and the Federal Trade Commission has ruled that the agencies are entitled to keep their methodologies secret.

Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data.

Credit-bureau models are developed from information in consumer credit-bureau reports.

Every 12 months, consumers can receive a free "credit file disclosure" statement with all of the information in their credit file from each of the three major credit reporting agencies. Go to www.annualcreditreport.com or call (877) 322-8228, and follow the prompts.

A FICO credit report, which condenses the credit-rating agencies' scores into a single number, is available for a separate fee from www.myfico.com.

Your credit score from FICO or any or all of the credit- reporting agencies will have a profound effect on whether lenders will extend credit to you, and how much you'll pay for it.

Copyright CHICAGO SUN-TIMES 2006
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