When applying for a form of credit such as a personal loan or credit card, applicants likely have their credit score top of mind. As they review their different credit scores, they may wonder: What’s the difference between a FICO® Score and a credit score?
Put simply, a FICO Score is simply a type of credit score that uses the FICO credit scoring model. A credit score is essentially a generic term, whereas a FICO Score is a credit score created by a specific brand.
Key Points
• FICO Score is a specific credit score developed by the Fair Isaac Corporation.
• Credit score is a broader term that includes scores from various models, including FICO.
• A FICO Score evaluates the risk of a borrower missing payments.
• Factors affecting your FICO Score include payment history, credit utilization, and credit history length.
• Consumers can get their FICO Score from lenders, credit card issuers, and financial institutions.
What Is a FICO Score?
A FICO Score is a type of credit score that’s created by the Fair Isaac Corporation (FICO). It’s a very popular form of credit score, and many companies rely on it when determining the creditworthiness of applicants.
Not all lenders use FICO Score models though, as some use their own credit scoring models or rely on a score made by one of FICO’s competitors.
Is a FICO Score the Same as a Credit Score?
As we mentioned, the main difference between FICO scores and credit scores is that FICO credit scores are only offered by the brand FICO, as this particular score relies on FICO’s specific credit scoring model. A credit score, on the other hand, is a generic term referring to scores created by any credit scoring model.
Essentially, what many credit scores do is predict how likely someone is to make their debt payments on time. FICO scores specifically predict how likely it is that someone will fall 90 days behind on a payment within the next 24 months. This credit limit is determined based on a complex algorithm that uses information from credit reports made for each consumer by the three major credit bureaus (Equifax, Experian, and TransUnion). FICO occasionally updates how it determines its scores and releases new versions of the FICO Score.
Typically, the higher someone’s credit score is — no matter where the credit score comes from — the higher the credit limit and the less likely they are to miss a debt payment. The more reliable a borrower appears to be based on their credit score, the better terms a lender is likely to offer them. A lower interest rate, for instance, can lead to savings, as demonstrated by this personal loan calculator.
FICO Score vs Credit Score: Which Is Better?
A FICO Score is not inherently better or worse than a credit score. The term credit score applies to the general concept of the score that comes from a credit scoring model. The FICO Score is simply a brand-name version of a credit score.
All lenders get to decide if they want to use their own internal credit scoring models or one from a brand like VantageScore or a FICO credit score. However, none of the different types of credit scores is necessarily better than the other.
FICO vs VantageScore
As briefly noted before, there are other brands that offer other credit scores to lenders. VantageScore is one of FICO’s main competitors. Like a FICO credit score, VantageScore® relies on information from the three major credit bureaus’ credit reports to determine scores.
Both FICO and VantageScore give higher credit scores to more creditworthy individuals, and their credit rating scales range from 300 to 850. Where these two scoring models differ is in how they determine their scores.
There are five categories of information that make up a FICO Score, and each category is given a different weight:
• Payment history: 35%
• Credit utilization rate: 30%
• Length of credit history: 15%
• Mix of your credit accounts: 10%
• New credit accounts: 10%
VantageScore, on the other hand, uses six different categories, but doesn’t assign specific weights using a percentage. Instead, VantageScore places a different level of influence on each category:
• Payment history: Extremely influential
• Credit utilization: Highly influential
• Length of credit history and mix of credit accounts: Highly influential
• Amounts owed: Moderately influential
• Recent credit behavior: Less influential
• Available credit: Less influential
Why Is a FICO Score Important and What Is It Used for?
FICO credit scores play an important role when it comes to borrowing money. This is because an applicant’s FICO score indicates how likely they are to make their debt payments on time. The more likely someone is to repay their loan, the less of a risk they pose to lenders.
Because of this, a high credit score is helpful if you want to get approved for a personal loan or a credit card, among other types of loans. Lenders use FICO scores and other types of credit scores to determine how much money to lend someone, how long they have to pay their loan back, and how high their interest rate should be.
What Affects Your FICO Score?
A handful of different factors affect a consumer’s FICO Score. The most important among those is payment history. Someone who consistently makes on-time payments will have a higher score, which is why prompt payment is critical to accessing top credit cards.
The next most important factor affecting a FICO Score is how much of available credit someone is using, also referred to as credit utilization ratio. Using up a lot of available credit indicates to top lenders that a borrower is overextended and may not be able to afford new loan payments.
Someone’s length of credit history also plays a role, and having a longer credit history can help give someone’s FICO Score a boost. Having a good credit mix made up of different types of credit — like installment loans, retail accounts, auto loans, and mortgage loans — is also taken into consideration, as is how recently someone opened new credit.
How Do I Get a FICO Score?
Getting a FICO Score is easy. Consumers typically can access their FICO Score through lenders, credit card issuers, credit bureaus, and select financial institutions.
Because the FICO Score is such a popular credit report, some consumers may want to know what their FICO Score is before they apply for a new form of credit, such as a type of personal loan. That way, they can get an idea of whether they may qualify and under what terms.
The Takeaway
The FICO Score is simply a type of credit score that utilizes a credit scoring model from the brand FICO. Many lenders choose to use the FICO Score when deciding which applicants to lend money to and what terms to offer them — including how much interest to charge them. That being said, some lenders choose to use industry-specific scores, competitor models, or their own internal models to determine who they want to lend money to. Bottom line: Before applying for a personal loan, it’s important to know where your credit score stands.
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FAQ
Why is my FICO Score lower than my credit score?
A FICO Score is a type of credit score. If another one of your credit scores is higher or lower than your FICO Score, it may be because it was calculated using a different scoring model.
What is a good FICO Score?
In general, if your FICO Score is in the mid to high 600s, it’s considered good. If your score falls in the high 700s or 800s, it’s classified as excellent.
Which credit score do most lenders use?
FICO scores are used in the majority of lending decisions — an estimated 90% of lenders use FICO scores to help determine how risky a borrower is. The score is also used to make decisions around interest rates, loan terms, and approvals.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
Photo credit: iStock/Lyndon Stratford
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