Experian and FICO are two of the largest credit reporting and scoring companies in the world. Even though they are affiliated, there are distinctions between the two companies and their services for the consumers and lenders.
What is Experian?
Experian is one of the three credit reporting agencies in the United States along with Equifax and TransUnion. For instance, Experian gathers account information regarding people’s credit borrowing and payment with the permission of creditors and other organizations and prepares detailed credit reports.
These credit reports include credit account histories, loans, bankruptcies, collections, and other personal commitments. Experian credit records also include employment, present and prior residences, and other information.
Consumers who want to check their credit report along with lenders like banks, credit card firms, insurance companies, and others to determine the creditworthiness of the applicants purchase the credit report data held by Experian. Apart from credit reports, Experian offers companies business analytics and other services.
What is FICO?
FICO is not a credit bureau but is the company that designs and builds credit scoring models and formulas. FICO scores are relied on by over 90 percent of original lenders and credit card companies.
FICO scoring models extract data from the credit report and use the formulas and quantitative methods to devise a three-digit FICO score which is aimed to reflect the consumer’s creditworthiness. It has been observed that the higher the score, the lower the credit risk and vice versa whereby a low score depicts a high risk of default or nonpayment of debts.
The FICO scores typically vary between 300 and 850 though there are FICO scores for specific industries that employ a different scale. Information on individuals provided by the three credit reporting agencies is collected and analyzed based on FICO’s algorithms to arrive at credit scores.
Experian and FICO while both are scoring models used for measuring credit worthiness of consumers have a different approach in the calculation of scores.
Although Experian and FICO are two different organizations acting independently in the field of consumer credit, their activities are interwoven.
FICO depends extensively on credit data provided and gathered by credit reporting agencies such as Experian to develop statistical credit scores. Experian and other consumer credit reporting agencies provide raw data accumulated from consumers’ credit accounts in the form of detailed, up-to-date credit reports necessary for the creation of FICO credit scores.
On the other hand, credit reports per se are qualitative and do not offer statistical analysis as detailed in FICO credit scores. The FICO score is, thus, a critical source of information for credit bureaus to complement their credit data products and provide their clients with actionable information on credit risk for lending decisions.
Key Differences Between Experian and FICO
While Experian and FICO work closely together, there are several key differences between the two companies and their primary offerings: While Experian and FICO work closely together, there are several key differences between the two companies and their primary offerings:
- Experian is an information provider that compiles data from lenders and other third parties to create consumer credit histories while FICO is a credit rating company that produces credit scores from credit bureau data.
- Experian credit reports give information concerning account history such as account type, balance, and payment history among others FICO scores give comprehensive information about a certain individual’s creditworthiness in a three-digit number.
- While Experian provides credit reports to consumers and businesses, FICO specializes in providing credit scores and analytics to businesses, although consumers can access their FICO scores from Experian and other credit bureaus.
- Consumers are capable of going to Experian’s website to obtain their credit reports and check for accuracy while Experian gathers information about an individual without his or her consent. These FICO scores are computed on an automated basis from Experian data.
- While Experian credit reports gather plain information regarding a person’s credit history in regards to borrowing, FICO scores analyze the data and the trends that are inherent in it to build a risk profile.
Although credit reporting by Experian and credit scoring by FICO are similar in some aspects, the two have different but mutually supportive roles in consumer finance. The comprehensive credit reports from Experian enable FICO to obtain clean data to come up with meaningful scoring tools for loan risk evaluation. Combined, their services are expected to address the problem of equal credit at reasonable and competitive interest rates according to the risk factors involved.
Call now for expert credit repair services: (888) 803-7889
Read More:
Is Experian a reliable credit score?
Why is Experian so much lower than FICO?
Does my credit score go up every time I make a payment?
Is credit karma or Experian better?
How quickly does credit score rise after paying off debt?
