A Beginners Guide To

FICO vs Credit Score

Acceptance for a car loan or credit card can be intimidating, especially if your lender mentions your FICO score or credit score. What are these scores exactly? How do they affect your ability to get 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 numerical rating that indicates a person’s likelihood of repaying debt. The higher a person’s score is, the more likely they are to repay their debts in full and on time. A good credit score opens doors to low-interest loans and high credit limits, so it pays to keep track of your rating. There are three major credit reporting agencies-Equifax, Experian, and TransUnion-that calculate scores based on information in a consumer’s credit report. Only one company, Fair Isaac Corporation (FICO), calculates the credit scores used by lenders. FICO has several versions of its scoring model, which use different formulas to determine 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!

Each month, you can obtain your FICO score for free from each of the three credit bureaus via your credit report. Fair Isaac Corporation’s FICO scores range from 300 to 850. 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 used more broadly than FICO scores, and they are calculated differently. Credit card companies, landlords, employers, and others can all check them. Your credit score is typically made up of scores from three major credit 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. Click here for more helpful tips.

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 loan approval criteria; some will approve borrowers with lower credit scores, while others will not 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. If you see something out of place-or something that doesn’t belong to you-report it immediately so 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.