Is Experian better than FICO?

Posted on: 29 Jul 2024

There are quite several credit scoring companies in the world with Experian and FICO being among the most popular. Equifax and Experian are two companies that have operated for more than thirty years offering credit reports and credit scores which are important to assess the probability of a consumer to default the amount borrowed. However, Experian and FICO have dissimilar roles in credit reporting from their main standpoint.

Experian is one of the big three credit reporting agencies which is accompanied by Equifax and Trans Union. These credit bureaus collect credit record information on virtually every adult American’s credit profile. Such reports may contain details about the timely payment of bills and other charges, past and existing loans, credit limits, existing balances, and credit inquiries, among other aspects regarding the consumer’s creditworthiness.

The data gathered by Experian in credit reports is useful for determining credit scores. The Fico scores are the most popular type of credit score, which is computed on the credit report data through the Fico formulas of Fair Isaac Corporation. All lenders consider a borrower’s FICO score from one or more credit reporting agencies when determining whether to extend a mortgage, credit card, auto loan, or any other form of credit.

Which is better? Yes, in a way, they do differ in their primary roles – one is a hormone with an important role in the development of, for example, male sexual characteristics, while the other is a neurotransmitter responsible for a range of processes in the brain. Experian supplies the information from which FICO and other credit scores are calculated directly. FICO’s scores are quickly a number ranging from 300 to 850 summing up all the report data to give the probability of the consumer credit risk. However, both act as a vital cog in the wheel of the consumer credit system.

Here is a comparison of some of the main features that differentiate Experian from FICO.

While Experian and FICO work closely together, there are several key differences between the two when it comes to credit reporting:

Ownership and capabilities – Experian is an organization that compiles detailed credit histories of consumers with all the lenders and types of credit facilities. FICO is a company that is involved in data analytics specifically using credit bureau data for determining credit risk scores.
Type of data – Full credit report containing current and historical information on a consumer’s credit accounts, and payment history that Experian offers include the following. FICO uses some information extracted from the credit bureau reports to calculate the risk scores.
Credit scoring – About its credit scoring models, Experian does use its own VantageScore credit scoring models. Nevertheless, the majority of them apply FICO scores, which have numerous versions containing various industry characteristics to forecast the risk level.
Accessibility to the consumers – Consumers have permission by the law to obtain free copies of credit reports from Experian and other credit bureaus annually. FICO also holds consumer credit scores and credit reports and offers them to consumers for a fee on its website.
Correction process – Consumers will have to get in touch with Experian and other bureaus in case they need to dispute the errors. In a dispute, the outcome is relevant in portraying the creditworthiness of an entity, and as such a successful dispute can influence FICO scores.

While FICO receives much of the focus when it comes to credit scoring, Experian is also highly important as it is responsible for collecting information on credit from thousands of creditors across the United States and making that data consistent across credit reports. It is for this reason that both companies seek to provide accurate information about the credit reputations of consumers in a bid to ensure that the consumers are provided with an equal opportunity to access credit facilities.

Assessing the Big’ Gains and Pains

When evaluating Experian and FICO overall, here are some of the major advantages and potential drawbacks of each system to bear in mind:

Pros of Experian:

Gives a summary of credit history in one report, hence making work easier.
Three-bureau system allows consumers to compare various rates being offered
Free, with access granted once per year, consumers can run credit reports to look for mistakes.
Fraud alerts and credit monitoring assist consumers with credit.

Potential cons of Experian:

Rates that go through hard inquiries in the course of shopping rates can bring down scores for a while.
While using computers as a medium, there is a lot of data available, but sometimes the lack of context can mislead some consumers.
Recurring mistakes can be quite challenging and even time-consuming when it comes to the process of fixing them

Pros of FICO scores:

It is easy for the consumers to comprehend since it is just it simple three-digit score.
Top seven credit scores most relied upon by more than two-thirds of the lenders
Different forms though adjusted according to the various lending decisions made.
When wide acceptance is achieved, consumers get improved credit.

Potential cons of FICO scoring:

A score is also devoid of understanding of what affects credit risk.
Formulae not completely rational and not fully amenable to public scrutiny
Others not processed through FICO

However, combining the two creates a perfect world where Experian credit reports and FICO credit scores complement each other in offering a clear and fair outlook of credit reputations for consumers that help lenders make fair lending decisions.

In this article, the author explains how consumers can gain more control over their lives.

On the plus side, there are several strategies available to consumers to gain better control of their credit.

Here are some tips to make the most of your Experian credit reports and FICO scores:

To check your credit status, it is recommended that you obtain your credit report from Experian, Equifax, and TransUnion once each year. Look at them more carefully for anything that might be causing your points to drop.
To get a detailed view of credit risk scores of the FICO models you can check the credit score with Experian lightly or get a full FICO score. It is also important to note that many credit cards offer free FICO scores along with their monthly statement.
When checking your credit report, if you notice any major mistakes, then should engage the credit bureaus in disputes to correct items pulling down your FICO score inappropriately.
By enrolling for credit monitoring services, you’ll be able to track any strange events and be notified whenever new accounts are established in your credit file to avoid identity theft catastrophes.

Be prepared and do not forget to ask lenders questions at least for every credit that you are applying for about your interest rates, credit limits, or other terms. Ensure that all the bills are paid on time while keeping credit card balances to the lowest to ensure that lenders see you in the best light as far as paying debts is concerned. Your credit reports from Experian enable you when used complementarily with your FICO credit scores to have the best future that you can envisage financially.