Understanding Credit Scores

What Makes Up Your Credit Score

Risk Scores

Understanding Inquiries

Tips for Raising Your Score

FICO vs VantageScore

Risk Scores

While FICO scores are the most commonly used credit risk scores in the US, lenders may use other scores to evaluate your credit risk. These include:

■ Application risk scores.

Many lenders use scoring systems that include the FICO score but also consider information from your credit application.

■ Customer risk scores.

A lender may use these scores to make credit decisions on its current customers. Also called “behavior scores,” these scores generally consider the FICO score along with information on how you have paid that lender in the past.

■ Other credit scores.

These scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores. When purchasing a credit score for yourself, most experts recommend getting the FICO score, as this is the score most lenders use when making credit decisions.

YOU HAVE THREE FICO SCORES

In general, when people talk about “your score,” they’re talking about your current FICO score. But in fact there are three different FICO scores developed by Fair Isaac—one at each of the three main US credit reporting agencies. And these scores have different names.

Credit Reporting Agency                                   FICO Score Name

TransUnion                                                       Fico Risk Score/Classic

Equifax                                                              Beacon

Experian                                                            Experian/Fair Isaac Risk Model

WILL YOUR SCORES BE DIFFERENT?

FICO scores range from 300 to 850. Fair Isaac makes the scores as consistent as possible between the three credit reporting agencies. Each of the three credit reporting agencies probably has different information about you, and that means your scores will also be different. If your information is identical at all three credit reporting agencies, your FICO scores should be pretty close. Since lenders may review your score and credit report from any of the three credit reporting agencies, it’s a good idea to check your credit report from all three and make sure they’re all accurate.

How Fico Scores Work.

FICO scores are the best-known and most widely used credit scores. Most credit scores used in the US and Canada are produced from software developed by Fair Isaac Corporation. FICO scores are provided to lenders by the three major credit reporting agencies: Equifax, Experian and TransUnion.

When lenders order your credit report, they can also buy a FICO score that is based on the information in the report. That FICO score is calculated by a mathematical equation that evaluates many types of information from your credit report at that agency.  By comparing this information to the patterns in hundreds of thousands of past credit reports, the FICO score estimates your level of future credit risk.

In order for a FICO score to be calculated on your credit report, the report must contain enough information—and enough recent information—on which to base a score. Generally, that means you must have at least one account that has been open for six months or longer, and at least one account that has been reported to the credit reporting agency within the last six months.

FICO scores provide a reliable guide to future risk based solely on credit report data. FICO scores have a 300–850 score range. The higher the score, the lower the risk. But no score says whether a specific individual will be a “good” or “bad” customer. And while many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single “cutoff score” used by all lenders.

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