Are You Confusing FICO with Credit Bureaus?
April 30, 2020, by Rob Kaufman
There's a lot of information out there about FICO. Many people use the terms FICO, FICO® Scores, Credit Scores, Credit Bureau, Credit Reporting Agency, etc. interchangeably - as though they have the same meaning. These types of statements often create confusion. Some people think FICO is a credit bureau and some people think that FICO is just a unit of measurement, like Fahrenheit! Both are wrong and it's time to clear up some of the confusion.
Who and What is FICO?
Fair Isaac Corporation (FICO) is the company that develops and maintains the mathematical formula to calculate FICO® Scores. FICO calculates your FICO Scores using information kept at the credit bureaus.
This leads to 2 important takeaways:
- The three major credit bureaus (Experian, Equifax and TransUnion) compile and store data on individuals' credit habits.
- FICO provides the algorithm used to create your FICO Scores based on the data that each credit bureau has compiled.
This should help clear up the fact that although FICO works with the credit bureaus, it is not actually a credit bureau (AKA "credit reporting agency").
Who and What is a Credit Bureau (also known as a Credit Reporting Agency)?
Now that you know a bit more about FICO, let's take a look at the 3 major credit bureaus: Experian, Equifax and TransUnion.
Lenders report to these three credit bureaus and the credit bureaus compile information about a consumer's borrowing habits. The credit bureaus create reports that are based on this information called "credit reports." The reports organize the borrowing information into different categories: accounts that are in "good standing", "bad standing" and other categories such as bankruptcies. We call this organized borrowing information "credit report data."
Creditors typically use the information from these reports, FICO® Scores, and other financial data to gauge a borrower's risk.
Each bureau collects or stores borrower information a little differently, so you can expect that your credit report data at one bureau could be different than your credit report data at another bureau. This is a reason why your FICO Score can be different for each bureau. If the underlying credit report data is different, your score will likely be different.
FICO and Credit Bureaus - Is the Difference Clear?
So now that you know a lot more about FICO and the credit bureaus, is the difference between them clear? Basically, the credit bureaus capture, gather and provide the data about a consumer's borrowing habits and debt. FICO uses their proprietary algorithms to provide credit scores based on each of the three credit bureau's data. If there's still any confusion, you can always check this out.