Lending Club Blog

Jargon Watch: Defining FICO

FICO actually stands for the Fair Isaac Corporation. This is the standard credit scoring system that was created in 1958. The company was founded by engineer Bill Fair and mathematician Earl Isaac. They started their consulting services and decision management systems in 1956. Today FICO is headquartered in Minneapolis, MN, with revenue of about $800 million dollars. They have about 3,000 employees world wide.

Now that you have the background on FICO, what does it mean to you, the borrower or lender? FICO scores are available to all 3 credit reporting services in the USA and Canada: Equifax, Experian and TransUnion. Lending Club has a partnership with TransUnion.

How does it work? The FICO score (or credit score) is a statistical analysis of a person’s credit files. This can be a number that is typically between 300 and 850. The higher the number you have, the more representative of your creditworthiness.

Why use a credit scoring system? Credit scoring systems are in place to determine the potential risks posed by lending money. Banks and credit cards use this score to determine if the risk in lending money will be rewarded back. Anytime you give someone a loan, there is risk involved. FICO just helps to lessen the risk for both the borrower and the lender. Keep in mind, there are no magic formulas, as people are still people, and we are glad they are.

To use the services of Lending Club, you must currently have a FICO score of at least 640. This qualifies about 75% of potential members. We believe that lowers the risk for all involved.

Other factors taken into account in Lending Club’s pre-qualification and scoring algorithm include a person’s debt-to-income ratio, and that person’s affinities with other users. More on Lending Club’s own scoring system (including our use of FICO score) in a later post.

Tuesday, May 29th, 2007 at 7:10 am

Comments (0)

  • Archives z

Recent Posts

Lending Club Honored with Economist Innovation Award

This month I was honored… Read More »
October 15, 2014

Finding the right company culture for you

How important is company culture to you? At Lending… Read More »
September 30, 2014

Welcome Vermont Investors!

Today, we’re thrilled to welcome residents of the state… Read More »
September 4, 2014

We filed to go public today

We filed a registration statement with the SEC today… Read More »
August 27, 2014

Our Billion Dollar Quarter

We’re excited to announce  that we’ve facilitated over $5… Read More »
July 8, 2014

Is Lending Club Available in My State?

Is Lending Club available in my state? That is… Read More »
July 7, 2014

5 Things Everyone Should Do Before a First Interview

After spending hours drafting your… Read More »
June 24, 2014

Lending Club Joins Senator Cory Booker to Discuss Improving Access to Capital for Small Businesses

Read More »
June 20, 2014

Lending Club Named a CNBC Top 50 Disruptor for a Second Year

For the second year in… Read More »
June 17, 2014

PRIME is now Automated Investing

Lending Club is excited to announce that PRIME has… Read More »
May 14, 2014