FICO vs Credit Score
Obtaining approval for a car loan or credit card can be intimidating, especially when your lender mentions your FICO or credit score. What are these scores? How do they affect your chances of getting approved? We compare the two most popular credit scores in the United States and explain how and why they are used in this guide.
A credit score is a numeric indicator of an individual’s propensity 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 the information in a consumer’s credit report. Only one company, Fair Isaac Corporation (FICO), calculates the credit scores used by lenders. FICO has multiple versions of its scoring model, each of which uses a unique formula to calculate a score. But all FICO models rely on five factors: payment history, amounts owed, length of credit history, new credit accounts opened, and types of credit used. This page has all the info you need. Check it out!
Your credit report will include your FICO score from each of the three credit bureaus each month. Fair Isaac Corporation’s FICO scores range between 300 and 850. Most lenders use FICO scores as an indicator for whether to give a loan; if your score is too low, you might not get approved at all. Credit scores are used more broadly than FICO scores-credit card companies, landlords, employers and others can also check them-and they’re calculated differently. Typically, your credit score is comprised of multiple scores from the three major credit reporting agencies: Equifax, Experian, and TransUnion. Each agency computes its own version of your score based on information in their records about how you pay bills, what types of accounts you have open, and how long those accounts have been 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.
The most important thing to remember about credit scores is that there is no such thing as a 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. Rather than obsessing over a single number, examine your credit score report and ensure that everything appears to be in order. 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.