Summary:
You may see the terms “FICO score” and “credit score” used interchangeably, but in fact, they refer to different scales of credit scores. While it’s worth noting that FICO scores are the most widely used scores by creditors, other credit scoring models also play a role in assessing your creditworthiness.
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Credit score vs. FICO score
When a lender or creditor evaluates your
credit history, it’s important to understand that “credit score” is more of a catch-all term for all credit scoring models. Only one of those credit scores is a FICO score, says Erika Kullberg, personal finance expert, attorney, and founder of Erika.com.
“While FICO scores are a type of credit score, the term “credit score” is more generic and can refer to various scoring models used by different credit bureaus and lenders. These scores may have different ranges and criteria for calculation.”
“However, there are certainly some similarities. Both FICO scores and credit scores aim to assess an individual’s credit risk and likelihood of defaulting on loans or credit obligations,” Kullberg adds.
What is a FICO score?
A FICO score, developed by the Fair Isaac Corporation (FICO), is a type of credit score utilized by most lenders to evaluate borrower credit risk. It provides a standardized measure of an individual’s creditworthiness, helping lenders make informed decisions regarding loan approvals and interest rates. FICO scores range from 300 to 850, with higher scores indicating lower credit risk.
FICO calculates your credit score by weighing the following areas of your credit history in order of importance:
- Payment history
- Credit utilization
- Length of credit
- Credit mix
- New credit
Pro Tip
Keep in mind that a lower credit risk not only makes you more likely to gain approval for a loan or credit card, but it also means you can qualify for lower interest rates and more favorable loan terms.
What is a VantageScore credit score?
As mentioned previously, “credit score” is a catch-all term for any scoring model that evaluates your credit history, with FICO being the oldest and most widely used model.
Another scoring model you’ll likely come across is VantageScore, which is similar to FICO but uses its own scoring and evaluation measurements. VantageScore is also the model jointly created by the three major credit bureaus — Experian, TransUnion, and Equifax — who also use their own proprietary scoring models.
While not as widely used as FICO scores, VantageScore models serve as valuable tools for understanding credit health and may offer different perspectives on an individual’s creditworthiness. These models are also important tools that can provide consumers with additional insights into their credit profiles and are useful for monitoring credit health over time.
| FICO score | VantageScore 4.0 | ||
|---|---|---|---|
| Payment History | 35% | Payment History | 41% |
| Credit Utilization | 30% | Age/Mix of Credit | 20% |
| Length of Credit | 15% | Credit Utilization | 20% |
| Credit Mix | 10% | New Credit | 11% |
| New Credit | 10% | Balance | 6% |
| Available Credit | 2% | ||
| Credit Score Ranges | Credit Score Ranges | ||
| Exceptional | 800–850 | Excellent | 781–850 |
| Very Good | 740–799 | Good | 661–780 |
| Good | 670–739 | Fair | 601–660 |
| Fair | 580–669 | Poor | 500–600 |
| Poor | 300–579 | Very Poor | 300–499 |
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How accurate is a FICO score?
The accuracy of a FICO score depends on several factors. First, it relies on the information contained within credit reports provided by major credit bureaus. Any discrepancies or errors in these reports can affect the accuracy of the score.
Additionally, the specific FICO scoring model used and the frequency of updates to credit information also impact accuracy. Despite potential variations, FICO scores remain a widely accepted measure of creditworthiness by lenders and are believed to be quite accurate, says Kullberg.
“As far as accuracy, FICO scores are considered highly accurate and reliable due to their widespread use and extensive historical data. However, other credit scoring models may also provide accurate assessments depending on the lender’s criteria and potential additional data sources.”
Why is my FICO score different from other credit scores?
While your FICO score represents one type of credit score, variations may exist due to the use of alternative scoring models by different lenders and credit bureaus. For instance, lenders may utilize proprietary scoring algorithms or alternative credit scoring models such as VantageScore. These models may weigh factors differently or utilize alternative data sources, leading to differences in credit scores.
“In general, lenders may prioritize FICO scores when evaluating credit applications due to their established reputation and standardization across the industry. However, some lenders may use their proprietary scoring models or consider alternative credit data in addition to FICO scores. There isn’t a one-size-fits-all approach.” — Erika Kullberg, personal finance expert
Another reason for variations across your credit scores is when and who reports to each bureau. For example, some creditors may not report to each of the three credit bureaus. So if a negative or positive remark wasn’t reported to one of the bureaus, then that score may be higher or lower than your other scores. The bottom line, however, is that it’s normal for your credit scores to vary, so there is nothing to be alarmed about.
On the other hand, if there are huge variances in your scores, that could signal fraud or simply a mistake. This is a common occurrence, which means it’s critical to regularly check your credit reports for errors or fraudulent activity and then dispute any issues. Getting rid of errors on your reports is one of the fastest ways to boost your scores.
You may also want to consider signing up for a credit monitoring service like Credit Karma or LifeLock. Many are free, and some may charge for more comprehensive services, like identity theft protection.
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FAQ
What factors influence my credit scores?
Factors such as payment history, credit utilization, credit age, credit mix, and credit inquiries influence your credit scores. Timely payments and responsible credit management contribute positively to your score, while missed payments and high credit utilization can have negative impacts.
Can I check my FICO score for free?
While many credit monitoring services offer access to FICO scores, you can also obtain your FICO score for free through certain credit card issuers or financial institutions. Additionally, you’re entitled to one free credit report annually from each major credit bureau, which may include your FICO score.
Do I need to check my credit scores regularly?
Monitoring your credit scores regularly empowers you to track your credit health and take proactive steps for improvement. By understanding the nuances of different scoring models, you can make more informed financial decisions and work toward achieving your credit goals.
Key takeaways
- FICO scores provide a standardized measure of creditworthiness used by many lenders to assess borrower risk.
- The accuracy of a FICO or other credit score depends on factors such as credit report accuracy and the specific scoring model used.
- Differences between FICO scores and other credit scores may stem from the use of alternative scoring models or proprietary algorithms.
- Different scoring models like VantageScore and credit bureau proprietary scores offer additional insights into credit health and can complement FICO scores.
- Regular monitoring of your credit reports and credit scores enables you to track your credit health and take steps for improvement as needed.
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