Credit score and FICO score, although related, are not the same thing. FICO scores on the other hand are computed by the Fair Isaac Corporation, whereby, it uses mathematical models and credit information from the three credit reporting agencies namely Experian, TransUnion, and Equifax. The FICO scoring model is the most popular credit scoring model that is used in credit granting decisions in the United States. In other words, while all FICO scores are credit scores, not all credit scores are FICO scores.
Derived from the information in your credit report that shows your creditworthiness, a credit score is a numerical value ranging from 300 to 850. It gives the lenders a quick summary of your likelihood of paying back a loan as stated over the designated period. Based on credit scores determined from several scoring systems, it is always between 300 and 850; the closer one gets to 850, the better. A credit score lets one better estimate an individual's credibility and lets the lenders' side benefit from better loan rates.
Though some of the most often utilized scales are FICO scores and VantageScores, lenders use other credit rating systems. Although they issue ratings differently, your credit report data shows in the same manner.
What is a FICO Score and how is it calculated?
Originally founded in 1989, Fair Isaac Corporation developed credit risk models and first made use of credit ratings. FICO is abbreviated as a result. FICO score is the most widely used tool nowadays to assess a person's credit risk.
Usually speaking, individuals talk about credit ratings while referring to FICO scores. FICO ratings span many credit scores between 300 and 850 and reflect a natural spectrum.
FICO Score 8 is the most current and most widely used FICO score lenders use to decide creditworthiness.
Especially with relation to business Designed for many credit choices across several sectors, including automobile, mortgage, and credit card, FICO scores show distinct sectors.
Originally aimed to provide customers with a broad view of their creditworthiness, and other FICO scores.
Three in all, your FICO scores are computed using data from Equifax, Experian, and Transunion. Your FICO scores will therefore vary based on the various agencies. The three agencies' information on the credit records may not be the same, hence the scores might differ very little.
Frequently Asked Questions about the Differences between FICO Scores and Other Credit Scores
While FICO scores are one of the most popular credit scores, there are various other scoring models used: While FICO scores are one of the most popular credit scores, there are various other scoring models used:
VantageScore: Created by the three credit bureaus as a rival to the FICO score.
Educational scores: Products such as Credit Karma, provide consumers with scores that quantify their credit health. Banks and other credit providers do not utilize these scores.
Custom scores: Product-specific credit scores developed by the credit provider to assess credit risk. Information may be weighted differently by each lender’s custom score.
Industry-specific scores: Target lending decisions in a specific field, for example, real estate or automobile.
The main differences between scoring models are: The main differences between scoring models are:
1. Calculation method – While different credit scores like the FICO score and others use different formulas, they differ in the way they weigh each factor in the credit report.
2. Score range – FICO and VantageScores are on a scale of 300 to 850. Other credit scores have different scales.
3. Availability - FICO scores are made available particularly when one applies for credit or any other service. Other educational credit scores can be obtained by non-lenders.
4. Usage – FICO scores are not only calculated by lenders but they are also used by the lenders in arriving at their credit decisions. Other scores can only assist consumers in managing their credit.
5. Versions - Many FICO scores are industry-specific for lending decision-making. Again, most other scores have only one score model.
Is It FICO Score or Credit Score:
Because FICO scores are used in most lending decisions, paying for a FICO score from myFICO. com lets you see the score a lender will see. However, FICO scores are not available for free and it will take a couple of dollars to get your scores. Nonetheless, what you get from sites like Credit Karma is a rough equivalent of your FICO score because they use similar but not identical calculations.
If a person wants to monitor credit regularly, he or she can check credit score free of cost to see if there is any significant change. However, it is advisable to obtain at least one FICO score directly from myFICO before applying for a big credit, for instance, a mortgage, car loan, or apartment rental. Even a slight increase in the FICO score may lead to a huge reduction in interest charges.
The Takeaway
Though they are not synonyms since they have certain differences, credit score, and FICO score relate to the same set of measures. Though all FICO scores are credit scores, not all credit scores are FICO scores as well. The most often used credit score model available, your FICO results offer a more realistic view of how a given lender will evaluate your creditworthiness for a given credit product. Getting your actual FICO score from myFICO is advised while you are looking for the best prices.
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