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FICO Score vs. Credit Score: What Is the Difference?

Brent Wiblin, Senior Managing Director, First Republic Bank
December 17, 2021

  • A FICO score is a particular brand of credit score that measures your creditworthiness.
  • FICO scores are calculated using a mix of five variables that together signal your creditworthiness.
  • There is a difference between FICO score vs. credit score – the latter is a more general term.

The terms “FICO score” and “credit score” are often referenced together. Although they may seem interchangeable, there are notable differences in FICO score vs. credit score.

FICO is a brand of credit score — not just a type of credit score — with numerous variations. It is important to know the difference between FICO score and credit score in order to understand your financial standing and plan your future.

What is a credit score?

Credit scores indicate a borrower’s creditworthiness by evaluating the consumer’s credit history and debt management. Lenders use these scores to issue credit products like personal loans and credit cards.

Credit scores are represented by a range of numbers. A higher credit score generally suggests a better history of credit management, which signals to lenders that a borrower will be less of a risk. Conversely, lower credit scores indicate poorer credit management, which may make you a higher risk for a lender.

There are various credit scoring brands, but the most commonly used are FICO and VantageScore.

What is a FICO score?

FICO (Fair Isaac Corporation) is the name of a company that creates credit scoring models. These models are used widely by lenders and financial institutions to evaluate a potential borrower’s creditworthiness. FICO now produces both its well-known “base scores,” like FICO Score 8, alongside several other scoring variations and credit models.

How are FICO scores calculated?

FICO’s base scoring model has five core components, which combine to make up a borrower’s credit score. Together they present a picture of a borrower’s creditworthiness, which indicates whether past credit management has been solid or if a borrower has had problems with managing existing credit.

These five elements are given various weightings in a credit score calculation and together compose a FICO score: 

  • Payment history (35%): This reflects how you have paid your credit accounts in the past. Because this is the strongest predictor of how a borrower will handle credit, it composes the largest percentage of the FICO score calculation.

  • Amounts owed (30%): This reflects the amount of debt you currently hold. This is a strong predictor of how you would handle additional credit since unpaid balances will keep you from paying off additional credit in full.

  • Length of credit history (15%): This indicates how long you’ve been using credit, which is an important metric to lenders. The longer the credit history, the better, since they have more data to evaluate.

  • New credit (10%): This indicates how many new inquiries you have in a short period of time (in other words, how many new accounts you’ve opened). Opening several new credit accounts in a short period of time can be detrimental to your credit score, especially if you don’t have a long credit history.

  • Credit mix (10%): This indicates how many different forms of credit you have (such as credit cards, loans, mortgages, etc.). The more types of credit open that you manage well, the more a lender will favor you since it demonstrates your ability to handle different kinds of accounts.

FICO scores come in many forms, which means you have several different FICO scores. When you check your credit report, the score you actually see depends on factors such as:

  • Which score you or the lender is checking

  • Which credit report(s) a given score-checking service is basing its scores on (the three main credit bureaus — Experian, Equifax and TransUnion — may include different information in their credit reports, since certain lenders may not report to all three bureaus)

FICO score ranges

FICO has preset scoring ranges that help consumers and lenders understand how good a given FICO score is, expressed both in numbers and words. For some lenders, borrowers must be in “Good” standing or above, for instance, in order to obtain credit.

Ranges for the base FICO scores are:

FICO Score

Rating

800–850

Exceptional

740–799

Very Good

670–739

Good

580–669

Fair

300–579

Poor

Again, there are different types of FICO scores, and not all FICO scores range from 300 to 850. A FICO Bankcard Score, for example, ranges from 250 to 900.

Why your FICO score matters

Understanding your FICO score — and the fact that you’ll have multiple credit scores, depending on the scoring system — is important. Knowing your FICO score exactly, or at least the range you are in, can help you with financial planning decisions since you’ll have a strong sense of the kind of credit for which you may be eligible. Even among a single type of credit product, the FICO score requirements vary; some credit cards, for instance, require Very Good credit, while other cards may be available to Fair rated borrowers.

Two of the most common scoring models lenders use are FICO and VantageScore, but there are other options, such as a proprietary model from a bank or other financial institution.

Ultimately, understanding your various credit scores — including FICO, VantageScore and any proprietary scores your bank uses — can help you see how others (such as lenders) view your creditworthiness. Credit scores are particularly important when trying to borrow money since they show lenders how likely you are to pay back debts in a timely manner. Generally, lenders are looking to provide credit to borrowers who can show the lowest risk.

With a strong understanding of your credit scores, you can gain a better understanding of your personal lending options and rates.

 

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