Introduction
When it comes to understanding creditworthiness, two terms often come up: FICO score and credit score. Many people use these terms interchangeably, but they are not exactly the same thing. In this article, we will dive deeper into the topic and explore the difference between a FICO score and a credit score.
What is a FICO Score?
FICO stands for Fair Isaac Corporation, the company that developed the FICO scoring model. A FICO score is a type of credit score that is widely used by lenders to assess an individual’s creditworthiness. FICO scores range from 300 to 850, with higher scores indicating better creditworthiness.
The FICO scoring model takes into account various factors, including payment history, credit utilization, length of credit history, types of credit used, and new credit applications. Each factor is weighted differently, and the algorithm calculates a score based on these factors.
What is a Credit Score?
A credit score is a broader term that encompasses various scoring models used to evaluate an individual’s creditworthiness. While FICO scores are the most commonly used credit scores, there are other scoring models such as VantageScore that lenders may also consider.
Credit scores, including FICO scores, are calculated based on the information found in an individual’s credit report. This information includes credit accounts, payment history, public records, and inquiries. Each scoring model may have its own algorithm and criteria for calculating credit scores.
The Differences
The main difference between a FICO score and a credit score lies in their specific scoring models. FICO scores are developed by the Fair Isaac Corporation and are widely used by lenders, while credit scores refer to a broader range of scoring models.
Another difference is the range of scores. FICO scores range from 300 to 850, while other credit scoring models may have different score ranges. For example, VantageScore ranges from 300 to 850 as well, but some other models may have different ranges.
Furthermore, the factors considered in calculating the scores may vary. While FICO scores consider factors such as payment history, credit utilization, length of credit history, types of credit used, and new credit applications, other credit scoring models may have different weightings or consider additional factors.
It’s important to note that while FICO scores are widely used by lenders, there is no universal credit score that all lenders use. Different lenders may use different scoring models or have their own proprietary scoring systems.
Conclusion
In summary, a FICO score is a specific type of credit score developed by the Fair Isaac Corporation. It is widely used by lenders to assess an individual’s creditworthiness. On the other hand, credit score is a broader term that encompasses various scoring models used to evaluate creditworthiness. While FICO scores are the most commonly used credit scores, there are other scoring models that lenders may consider.
Understanding the difference between a FICO score and a credit score can help individuals navigate the world of credit and make informed decisions about their financial health.
References
– www.myfico.com
– www.experian.com
– www.equifax.com
– www.transunion.com
