FICO vs Credit Score
Getting approved for a car loan or credit card can be daunting, especially when you hear your lender mention your FICO score or credit score. What are these scores? How do they affect your approval chances? This guide compares and explains the two most popular credit scores in the United States, as well as how and why they are used.
A credit score is a numerical rating that indicates how likely a person is to repay debt. The higher a person’s credit score, the more likely it is that they will repay their debts on time and in full. A good credit score opens the door to low-interest loans and high credit limits, so it is beneficial to monitor your score. Equifax, Experian, and TransUnion are the three major credit reporting agencies that calculate scores based on information in a consumer’s credit report. However, only one company-Fair Isaac Corporation (FICO)-calculates scores used by lenders. FICO has multiple versions of its scoring model, each of which uses a unique formula to calculate a score. However, all FICO models are based on five factors: payment history, amounts owed, credit history length, new credit accounts opened, and credit types used. Click for more information on this product.
Your credit report will include your FICO score from each of the three credit bureaus each month. FICO scores (used by Fair Isaac Corporation) range between 300 and 850 (100 is average). Most lenders use FICO scores to determine whether or not to make a loan; if your score is too low, you may not be approved at all. Credit scores are utilized more broadly than FICO scores-landlords, employers, and credit card companies can all check them-and are calculated differently. Your credit score is usually comprised of several different scores from three major reporting agencies: Equifax, Experian and TransUnion. Each agency calculates its own version of your score based on information in their records about how you pay bills, what kinds of accounts you have open and how long you’ve had those accounts open. Because each agency’s information is slightly different, it is possible to have a high score with one agency and a low score with another. View here for more info.
When reviewing credit scores, it is crucial to remember that there is no single good or bad number. Lenders set their own standards for approving loans-some will approve borrowers with lower scores, while others won’t touch anyone below a certain threshold. So, rather than obsessing over a single number, take your credit score report and make sure everything looks correct. Report immediately any inappropriate content or content that does not belong to you so that it can be removed. You should also keep track of where your scores stand over time, so you know if any sudden changes could mean trouble down the road.
