The letters "FICO" form an acronym that originated from the founder, the Fair Isaac Corporation. Basically it is a ranking between the numbers of 400 and 800, decided upon by a mathematical algorithm, where 400 is the worst and 800 the best. There are other companies with their own versions of this system.

The algorithm's "secrets" have been closely guarded, but many have used reversed mathematical procedures to create their own. All that you need to know is that any late payment will lower your score - more late payments and the later that you make them will cause the score to fall lower still. Another factor that influences the score is your total debt burden and to a lesser degree, the number of credit cards you use and the number of credit checks that are carried out.

A score around 620 is "marginal"; below 580 is "poor", whilst 720 and above is "very good" to "excellent". The "gray area" between 620 and 720 is where considerations other than your FICO will determine the success of a loan application.

All lenders, including banks, mortgage companies and credit card providers rely upon your FICO in determining whether to offer you credit and how high the interest rate will be. The higher your score, the lower the interest rate, generally speaking.

Sometimes other factors will be an influence. These include the current trend in interest rates, a higher than average demand for loans or other forms of credit and the state of the economy.

There have been two rather noticeable changes over the last 2 decades. One is that underwriting loans is completed differently due to the increasing use of computers and associated financial methods. The other is the influence of the internet which has changed the mode of working within finance.

In spite of these changes, the importance of the FICO as a tool has remained unchanged. It still is the determining tool for the initial, if not the final, decision of a lender to give credit, especially during times of high credit demand.

There are alternatives for those people who have had problems with their finances. Even with a low FICO, there are choices. Firstly, though, you must plan to make improvements to your credit score.

Your efforts to rid yourself of bad credit rating, either through diligent payments or negotiation, will be rewarded by an increase in your FICO score. Whilst this is happening, you may wish to check out the lenders who are willing to take a risk with you, but keep in mind that their interest rates are nearly always very much higher to coincide with the higher risk you pose. Perhaps, though, it is best to just forget about asking for credit until your situation improves.