A credit score is a three-digit measure of how well youre managing your finances. Lenders may utilize a variety of credit scores, including the FICO score, to determine a borrower’s risk.
Gaining an understanding of the distinction between FICO and credit scores can help you raise your score and be eligible for lower-rate loans.
Here’s the deal:
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You’ve probably heard of credit scores, those three-digit numbers that lenders use to gauge your creditworthiness. But did you know there’s a specific type of credit score called a FICO® score?
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FICO® scores are just one type of credit score that lenders or creditors may use when determining whether they’ll provide you a loan or credit card,
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While FICO® scores are commonly used by lenders to assess your credit risk, other credit scores can also give you a good idea of where you stand.
So, what’s the difference between a FICO® score and a credit score?
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In most cases, there’s no significant difference between your credit score and your FICO® score. Both are based on information in your credit report, which is a detailed record of your borrowing and repayment history.
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However, there are a few key distinctions to keep in mind:
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Other credit scores might be produced by various businesses, but FICO® scores are produced by the Fair Isaac Corporation.
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FICO® scores use a proprietary scoring model that takes into account five key factors: payment history, amounts owed, length of credit history, credit mix, and new credit.
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Other credit scores may use different scoring models and may weigh these factors differently.
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The main distinctions between FICO® scores and other credit scores are outlined in the following table:
| Feature | FICO® Score | Other Credit Scores |
|---|---|---|
| Generated by | Fair Isaac Corporation | Various companies |
| Scoring model | Proprietary | Varies |
| Factors considered | Payment history, amounts owed, length of credit history, credit mix, new credit | Varies |
| Range | 300-850 | Varies |
So, which credit score is more important?
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The truth is, both FICO® scores and other credit scores can be important to lenders.
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FICO® scores are widely used, so it’s important to keep an eye on them.
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However, other credit scores can also provide valuable insights into your creditworthiness.
Here are some tips for improving your credit scores:
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Pay your bills on time. This is the single most important factor in your credit score.
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Keep your credit utilization low. This means using less than 30% of your available credit.
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Don’t apply for too much new credit. Every time you apply for new credit, a hard inquiry is placed on your credit report, which can lower your score.
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Check your credit reports regularly for errors. You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at AnnualCreditReport.com.
By following these tips, you can improve your credit scores and make it easier to qualify for loans and credit cards at the best rates.
Frequently Asked Questions
Q: What is the difference between a credit score and a FICO® score?
A: In most cases, there is no significant difference between a credit score and a FICO® score. Both are based on information in your credit report, which is a detailed record of your borrowing and repayment history. However, there are a few key distinctions to keep in mind:
- FICO® scores are generated by the Fair Isaac Corporation, while other credit scores may be generated by different companies.
- FICO® scores use a proprietary scoring model that takes into account five key factors: payment history, amounts owed, length of credit history, credit mix, and new credit.
- Other credit scores may use different scoring models and may weigh these factors differently.
Q: Which credit score is more important?
A: Both FICO® scores and other credit scores can be important to lenders. FICO® scores are widely used, so it’s important to keep an eye on them. However, other credit scores can also provide valuable insights into your creditworthiness.
Q: How can I improve my credit scores?
A: Here are some tips for improving your credit scores:
- Pay your bills on time. This is the single most important factor in your credit score.
- Keep your credit utilization low. This means using less than 30% of your available credit.
- Don’t apply for too much new credit. Every time you apply for new credit, a hard inquiry is placed on your credit report, which can lower your score.
- Check your credit reports regularly for errors. You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at AnnualCreditReport.com.
Q: Where can I get my credit score?
A: You can get your credit score from a variety of sources, including:
- Your credit card issuer
- Your bank
- A credit monitoring service
- A free credit report website
Q: How often should I check my credit score?
A: It’s a good idea to check your credit score at least once a year. You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at AnnualCreditReport.com.
Q: What is a good credit score?
A credit score of 700 or above is generally considered to be good. A credit score of 800 or above is considered to be excellent.
Q: What is a bad credit score?
A credit score of 600 or below is generally considered to be bad. A credit score of 500 or below is considered to be very bad.
Q: What can I do if I have a bad credit score?
If you have a bad credit score, there are a few things you can do to improve it:
- Pay your bills on time.
- Keep your credit utilization low.
- Don’t apply for too much new credit.
- Check your credit reports regularly for errors.
- Consider getting a secured credit card.
- Get help from a credit counselor.
Q: How long does it take to improve my credit score?
It can take several months or even years to improve your credit score. However, it’s important to be patient and consistent with your efforts.
Q: What are some common credit score myths?
There are a lot of myths about credit scores. Here are a few of the most common:
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Myth: Checking your credit score will hurt your score.
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Fact: Checking your credit score will not hurt your score. In fact, it’s a good idea to check your credit score regularly to make sure there are no errors.
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Myth: Closing unused credit cards will improve your score.
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Fact: Closing unused credit cards can actually hurt your score. This is because it will reduce your available credit and increase your credit utilization ratio.
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Myth: Paying off your credit card balance in full each month will not help your score.
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Fact: Paying off your credit card balance in full each month is one of the best things you can do to improve your credit score.
Q: Where can I learn more about credit scores?
There are a lot of resources available to help you learn more about credit scores. Here are a few:
- The Consumer Financial Protection Bureau (CFPB)
- The Federal Trade Commission (FTC)
- The National Foundation for Credit Counseling (NFCC)
- AnnualCreditReport.com
What Is a FICO Credit Score?
FICO credit scores are generated by Fair Isaac Corporation. The need for a standard credit score for the industry to assess risk led to the development of these scores for consumer use in the late 1980s.
FICO scores are three-digit numbers ranging from 300 to 850, with 850 being the best score. FICO scores are calculated based on information included in consumer credit reports. There are five factors that go into the calculation:
- Payment history: Payment history accounts for 33.5 percent of your FICO credit scores While missing or late payments can cost you credit score points, on-time payments can improve your score.
- The percentage of available credit that is used at any given time is known as credit utilization. This factor accounts for 30% of FICO score calculations.
- Credit age: Credit age is a measure of how long a person has typically used credit. The older someones credit age is, the better. This factor accounts for 15% of FICO credit score calculations.
- FICO also takes into account the variety of credit that an individual has access to. e. , installment loans versus revolving credit). Credit mix makes up 10% of FICO credit score calculations.
- Credit inquiries: Credit inquiries account for the 2010 percent of your FICO credit score After a hard credit check, a new inquiry is recorded on your credit report. Examining your own credit reports does not impact your credit score or result in a hard credit pull.
FICO generates multiple versions of its credit scores, which are designed for different lending situations. Depending on the data used to calculate your credit scores from your credit reports, you could have one of thirty distinct FICO credit scores.
For example, credit decisions frequently use FICO 8 and FICO 9, but less frequently use the more recent FICO 10, which includes trended data.
Do Lenders Use FICO Scores or Other Credit Scores?
Lenders will probably check at least one of your credit scores when you apply for loans or credit lines. While most lenders base their decisions on FICO credit scores, it’s possible that they’ll use another model to decide whether to approve your application for a loan or credit line.