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FICO vs Credit Score

Obtaining approval for a car loan or credit card can be intimidating, especially when your lender mentions your FICO or credit score. What are these scores? How do they affect your approval chances? In this guide, we compare the two most popular credit scores in the United States and explain how they work and why they are used.

A credit score is a numerical rating that indicates how likely a person is to repay debt. The higher a person’s credit score, the more likely it is that they will repay their debts in full and on time. A good credit score opens the door to low-interest loans and high credit limits, so it is beneficial to monitor your score. Equifax, Experian, and TransUnion are the three major credit reporting agencies that calculate scores based on information in a consumer’s credit report. Only one company, Fair Isaac Corporation (FICO), calculates the credit scores used by lenders. FICO has multiple versions of its scoring model, each of which uses a unique formula to calculate a score. All FICO models, however, rely on five variables: payment history, amounts owed, length of credit history, new credit accounts opened, and types of credit utilized. This page has all the info you need. Check it out!

Each month, you can obtain your FICO score for free from each of the three credit bureaus via your credit report. Fair Isaac Corporation’s FICO scores range between 300 and 850. Most lenders use FICO scores to determine whether or not to make a loan; if your score is too low, you may not be approved at all. Credit scores are used more broadly than FICO scores-credit card companies, landlords, employers and others can also check them-and they’re calculated differently. Your credit score is usually comprised of several different scores from three major reporting agencies: Equifax, Experian and TransUnion. Each agency calculates its own version of your credit score based on information in its records about how you pay your bills, the types of accounts you maintain, and the length of time those accounts have been open. Because each agency’s information is slightly different, it is possible to have a high score with one agency and a low score with another. Click here for more helpful tips.

When reviewing credit scores, it is crucial to remember that there is no single good or bad number. Lenders establish their own criteria for loan approval; some will approve borrowers with lower credit scores, while others will not lend to anyone with a score below a certain threshold. So, rather than obsessing over a single number, take your credit score report and make sure everything looks correct. If you see something out of place-or something that doesn’t belong to you-report it immediately so it can be removed. You should also monitor your scores over time so that you are aware of any sudden changes that could spell trouble in the future.

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