Fico score vs Credit score
FICO® Scores and credit scores are sometimes confused, however FICO® produces a variety of products, whereas credit scores are created by various organizations. A credit score can be thought of as the umbrella term for a computer model that analyses consumer credit records to generate a score. When someone says credit score, they’re usually referring to a three-digit number that reflects a borrower’s repayment history for loans and lines of credit.
Is credit score the same as FICO score?
Credit ratings are not intended to be exact predictions of whether or not a person would default on their credit payments. Instead, lenders consider them as a gauge of a borrower’s ability to repay a loan in the future. In its Report to Congress on Credit Scoring, the Federal Reserve describes it effectively, stating that “credit scores reliably predict relative loan performance throughout all population groups.”
To put it another way, your FICO® scores are simply one sort of credit score available to you. This is due to the fact that FICO® is a firm that develops specialized scoring models that are used to calculate your credit ratings. Other companies, on the other hand, utilize different scoring methodologies to establish your credit scores.
Why is my FICO score and credit score different?
In the United States, three national credit agencies (Equifax, Experian, and TransUnion) collect, update, and store credit histories for the majority of Americans. While the three credit bureaus collect most of the same information on customers, there are some variances. For example, one credit bureau may contain unique information about a customer that the other two do not have, or the credit bureaus may store or present the same data element differently.
Each of these credit bureaus has a predictive FICO® scoring system from which lenders seek a FICO® Score when assessing a consumer’s credit risk. Consumers with high FICO® Scores on bureau “A’s” data will likely see a similarly high FICO® Score at the other two bureaus because the FICO® scoring system is consistent across the credit bureaus. When the underlying data is the same throughout the bureaus, consumers with lower FICO® scores at bureau “A” are more likely to have poor FICO® ratings at the other two bureaus.
These three-digit figures can go a long way toward determining whether a lender will do business with you, whether you’re looking for a credit card or buying a house.
The issue is that there are numerous credit rating models available. It’s completely typical for scores from different agencies to differ slightly. Lenders are in charge of deciding the information they submit to the main credit bureaus — and which bureaus they report to in the first place. Because your FICO® Scores are based on the information on your credit reports, you may not receive the same score from each credit bureau. Of course, any variations in your ratings could be due to a variety of factors; more on that later.
Are FICO scores higher than credit scores?
The majority of FICO® scores fall between 300 and 850, with a higher number indicating stronger credit. FICO® also has industry-specific ratings ranging from 250 to 900 for credit cards and auto loans. Therefore FICO® Scores vs credit scores are not the same. FICO® Scores have been the industry standard for measuring a person’s credit risk for over 25 years. FICO® Scores are now used by more than 90% of top lenders to make faster, fairer, and more accurate lending decisions. Other credit scores can differ dramatically from FICO® Scores—by up to 100 points!
90% of top lenders use FICO® scores to make choices about credit approvals, conditions, and interest rates. Applying for a home mortgage loan, vehicle loan, a credit card, or a line of credit, your FICO® Score is almost certainly checked. Lenders began utilizing Fair Isaac Corporation’s FICO® ratings in 1989, and the scoring models have been changed multiple times since then. FICO® scores are used by more than 90% of leading lenders, according to FICO®. FICO® also offers industry-specific scoring models (and scores) for specific credit products, such as auto loans, credit cards, and mortgages, in addition to its standard versions. So, even if you get your FICO® scores through your bank, they aren’t always the same numbers that a lender sees when you apply for credit.
Is FICO your real credit score?
A FICO® score is only one type of credit score. Because it’s the most extensively utilized, you’ve probably heard of it more frequently. It was created in 1989 by the Fair Isaac Corporation. While there are other scores, FICO® is used by 90% of “leading lenders” when making lending decisions. However, as discussed earlier, from a mortgage perspective, the credit score used to determine approvability is the middle credit score among the Equifax, Experian and TransUnion scores.
FICO® Scores, like other credit risk scores, forecast the possibility of falling 90 days behind on a debt during the next 24 months. FICO® accomplishes this by employing complicated algorithms based on data from each of the three national credit bureaus: Experian, TransUnion, and Equifax.
FICO® scores are updated on a regular basis, and different versions of the scores are created to operate with the databases of each bureau, which is why there are so many FICO® Scores. Other organizations, such as VantageScore®, provide credit risk scores based on the same analysis of consumer credit reports.
Credit scoring algorithms assess consumer credit behavior, so a higher score means you’re less likely to miss a payment than someone with a lower score—and so, a higher score can help you get better conditions when applying for credit.
FICO® and VantageScore credit ratings vary from 300 to 850 and are used to categorize customers. A FICO® Score of 800 to 850, for example, is regarded “excellent.” Even if they use the same credit report range and information, each scoring model uses a different methodology, which could result in a different score.
For additional information or to have a conversation regarding which loan would be more beneficial for you, call The Cain Mortgage Team at 803 261 9267!
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