Every person's financial life revolves around this highly important figure, which also establishes their creditability. It covers every aspect of life, from whether one is qualified to get credit cards and loans, to the interest one would have to pay. Considering the aforementioned credit score specifics, it is essential to go over the two main scoring systems, Equifax and FICO. Still, which one is better? Here is a review of what you should know about Equifax and FICO credit ratings to help you decide.
Retail scores computed from credit records provided by credit bureaus Equifax, Fair Isaac and Company, and Experian respectively are Equifax and FICO scores.
We should start with defining the most understandable. Though there are three main credit scoring organizations operating in the United States right now, Equifax and FICO are the two most often used ones.
Among the three credit bureaus— Experian and TransUnion are the other two most well-known credit reporting agencies; Equifax is the third. Using data from Equifax's database, Equifax computes your Equifax credit score from the information in your credit report the range is 280–850.
Though famed for creating the FICO credit score methodology, FICO is not a credit bureau. Arriving at your FICO score, FICO analyzes information taken from your Equifax, Experian, and TransUnion credit reports. FICO ranges from 300 to 850 and is also very variable.
As you may know, however, Equifax does not have one FICO score or one Equifax score—rather, there are numerous of each. The three credit reporting agencies and the several credit models determine your multiple credit scores.
Two credit ratings computed using separate models and criteria are Equifax credit score and FICO score.
While Equifax and FICO scores generally provide lenders with similar information about your credit risk, there are some key differences between the two models:
- Scoring Algorithms: The two scores, Equifax and FICO scores, do not use the same algorithms and data. While there is a generally agreed formula, Equifax has its formula and FICO has its formula too. This means that even though your raw credit report data are the same, there is a probability of your scores coming out slightly different from the two models.
- Score Scale: Equifax’s score range is 280-850 while FICO’s score range is 300-850 and that is why the scores are slightly different. But they state the same credit risk profile (very poor, average, good, excellent). However, the differences in this scale do at times lead to some confusion when working with scores.
- Reporting Agencies: Equifax can only provide information from Equifax’s credit report and Equico's credit score while FICO can use information from Equifax, Experian, and TransUnion’s reports to come up with all your FICO scores. It means that lenders may prefer to use FICO for the reason that it draws more of the total data on how one manages credit.
- Types of Scores: FICO provides various forms of credit score specialized for different applications; for example, FICO Auto Score and FICO Bankcard Score. Equifax mostly includes one primary credit score in the same line as a general FICO score.
- Data Updates: Another major difference is that for FICO scores it is not as easy to update it in between the times Equifax scores are provided annually. Of course, if you monitor your Equifax report every month then that score will be the most up-to-date representing the most recent changes in your credit report while your FICO scores may be a week or two old.
- Primary Uses: Hence though both scores provide information about credit risk levels and behaviors to the lenders, more emphasis is placed on the FICO score which is dominant and most often used by lenders. Having said that, most large creditors depend more on your FICO scores each time you apply for loans or credit cards.
Which Credit Score is Better: Which one do you prefer: Equifax or FICO?
Therefore, when it comes to the Equifax vs FICO credit scores, the model that you should be more concerned with is FICO credit scores. The fact is that both are valuable and both have their essential role.
However, they have failed to overtake FICO which is still the most popular among most lending institutions. It is important to note that if your primary concern is approval rates and interest rates on the offered credit as low as possible, then the main goal is to have high FICO scores at all times. And even if you think your Equifax scores are better, it is the FICO scores that are mostly relevant to the banks, creditors, and credit card companies when considering your applications.
Also, since you are always informed of all the FICO scores relating to auto loans, mortgages, and credit cards, you can get the most appropriate FICO score that you anticipate using in future financing needs. However, it is also practical to check Equifax credit score from time to time to observe the change in your credit reports that will subsequently affect that awesome FICO grade
As a result, Equifax and FICO scores are quite similar and reveal the same basic information to lenders about your creditworthiness, though they can use different scoring models and scales. It can be possible to obtain high values in each of the models or various results if certain specialty items are given different weights in the calculations of the scores of the two models.
How to raise Equifax and FICO scores?
While only FICO has the secret sauce on how they compute credit scores, both credit giants offer some tips and tricks regarding aspects that affect your score.
Maintaining responsible credit habits in these areas will support improving numbers with Equifax and FICO alike:
- Pay all bills on time: Credit history plays a critical role in determining scores in both models, particularly on how individuals make payments. Paying bills and managing credit cards, loans, etc., never pay bills after the due date.
- Lower credit card balances: If the balances are high in comparison to the credit lines on cards, then the scores are pulled down owing to a high credit utilization ratio. Pay down balances.
- Limit hard credit inquiries: Avoid applying for credit more often than necessary to minimize their credit inquiries. Avoid piling up applications in a short time.
- Build account history: There is evidence that shows that credit accounts when opened for a prolonged period contribute to high scores. It is also better to preserve the old unused credit that is long-standing rather than shutting the card.
- Not only get Equifax data to be aware of what is being reported: but to also watch all three reporting agencies in close detail to catch any inaccuracies immediately and have them corrected through the bureaus. The sources also show that mistakes can dent credit scores.
Although it is annoying that mortgage lenders look at FICO score rather than Equifax, it is beneficial in a way it ensures that consumers stay keen on the FICO scores that are the benchmark of ideal preferred rates in large credit sale products that affect the financial status of the consumers largely.
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