What's the difference between FICO® Scores and non-FICO credit scores?
Not all credit scores are FICO Scores. For over 25 years, FICO Scores have been the industry standard for determining a person's credit risk. Many lenders use FICO Scores to make faster, fairer, and more accurate lending decisions. Other credit scores can be very different from FICO Scores—sometimes by as much as 100 points!
What's in a name? When it comes to FICO Scores versus other credit scores, the answer is "quite a lot."
Many lenders use FICO Scores to make decisions about credit approvals, terms, and interest rates. Chances are when you apply for a mortgage, an auto loan, credit card, or a new line of credit, the bank or lender is looking at your FICO Score.
The reason? Lenders know what they are getting when they review a FICO Score. FICO Scores are trusted to be a fair and reliable measure of whether a person will pay back their loan on time. By consistently using FICO Scores, lenders take on less risk, and you get faster and fairer access to the credit you need and can manage.
FICO Scores use unique algorithms to calculate your credit risk based on the information contained in your credit reports. While many other companies design their credit scores to look like a FICO Score, the mathematical formulas they use can vary greatly.
Unfortunately, the methods used by these other companies can lead to credit scores that are very different from your FICO Score. And even just a few points difference can have significant consequences on your terms and rates?potentially costing you hundreds or even thousands of dollars. Learn how FICO Scores are calculated.
Why do FICO Scores matter?
Imagine a world where every lender used a completely different method to decide whether or not to give you a loan. You would have no way of knowing whether you would be approved at one place and denied at another.
This was actually the case not that long ago. There were all kinds of different ways that lenders would make decisions about extending credit (including data about a person's address, type of employment, and gender, among other things.). People were often approved or denied based on inconsistent and sometimes unfair information.
In 1989, FICO Scores were created as a way to help streamline the decision-making process for lenders and make the lending process more consistent and fairer for people like you. Read more about the history of FICO Scores.
Top 3 reasons you should choose FICO Scores over non-FICO credit scores
"For years, there has been a lot of confusion among consumers over which credit scores matter. While there are many types of credit scores, FICO Scores matter the most because the majority of lenders use these scores to decide whether to approve loan applicants and at what interest rates."
? The Wall Street Journal1
So why choose FICO Scores over other scores? Here are just a few reasons:
- You can be confident you're seeing a score many lenders actually use. Because FICO Scores are the most widely used scores, it is very likely the lender will check your FICO Scores when you apply for credit.
2.You can make more informed financial decisions. With FICO Scores, you're better prepared to know when to apply for credit because you're viewing the scores used by 90% of the top lenders.
Remember, non-FICO credit scores can differ by as much as 100 points. Other credit scores may vary from your FICO Score by several points. This variance could cause you to overestimate your likelihood of getting approved. According to a recent Consumers Union report, "score discrepancies can give consumers the false hope that they qualify for credit or low-interest rates when they do not. Consumers can face higher interest rates than expected, or be denied credit."2
On the flip side, non-FICO credit scores can lead you to underestimate your creditworthiness, keeping you from purchasing a much-needed family car or refinancing a mortgage that could save you thousands in interest.
- You get 25+ years of experience and a score that evolves to meet your needs. The way we use credit has changed a lot since the first FICO Score. For example, today, we use credit cards more frequently and loans are larger to accommodate rising costs.
As spending behaviors have changed, FICO Scores have evolved. For instance, FICO Scores continue to accurately predict credit risk so you can get access to the credit you need and get credit that you can manage. By choosing FICO Scores, you're getting decades of industry-leading knowledge and expertise that lenders value and trust.
FICO Scores vs. other scores: Compare for yourself
|FICO Scores||Other Credit Scores|
|The standard for over 25 years, used by 90% of top lenders||Often called "educational" scores|
|Makes lending decisions consistent, fast, and fair||Can be significantly different than your FICO Scores|
|Gives you a better understanding of your credit and more confidence when you apply||Can be off by up to 100 points —causing you to under or overestimate your creditworthiness|
If it doesn't say FICO Score, it's probably not a FICO Score
"62% of consumers who received a non-FICO credit score mistakenly believed they received a FICO® Score."
? BAV Consulting Survey3
There's simply no substitute for FICO Scores. Remember, before the creation of FICO Scores there was no industry-standard to make sure access to credit was more fair and accurate. When you want to know where your credit stands, it just makes sense to get the scores your lenders will use.
A note of caution: some sites may try to sell a credit score and pass it off as a FICO Score. If it doesn't clearly say FICO Score, it's probably not a FICO Score.
Check here to know where you can get your FICO Scores.
The Wall Street Journal. (Aug 2015). American Express Unveils FICO Scores for Cardholders.
Consumers Union. (April 2014). ERRORS & GOTCHAS: How Credit Report Errors and Unreliable Credit Scores Hurt Consumers, 24.
BAV Consulting survey (BrandAsset® Valuator). (September 2015). Visit www.bavconsulting.com. All Rights Reserved.
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