Investment is a big step you take with your money. Every investment you make builds your financial portfolio. So, your credit history is an essential factor every company or lender will look in. When you have a good score, it helps you take loans, save money on interest, insurance, and security deposits on everything from cell phones to utility services. You and including me often wonder the difference between Credit score vs FICO score- So here’s our guide for you.
So, now you know how essential your scores are. Let us look at what is the difference between Credit score vs FICO score and why it’s significant to maintain those scores.
- It offers you free credit score updates, monitoring services, and personalized advice on how to build your score. It’s is one of the most popular “free credit score” sites on the Internet.
- Credit Karma has various options for credit cards – Balance transfer credit cards, cashback credit cards, 0%, and low-interest credit cards, Rewards credit card, Travel credit card, Hotel credit cards
- Your eligibility-reviewed through your credit profile
- Credit Karma helps you to make better financial decisions- by breaking down your credit information and analyzing the information.
What is a credit score?
So, a credit score is a number distilling creditworthiness of an individual. Financial institutions look at your credit scores when assessing an application for a loan. Your credit score is similar to your school’s GPA system. Every lender has its standards for what constitutes a good credit score. So, a range between 700 and higher is preferred. The higher your score is, the better your chances are of getting financial assistance.
The lenders look into the details of your debts like your payment history, total debt, pristine credit, and other kinds of credits you have utilized. So, It is calculated by three major credit bureaus, TransUnion, Experian, and Equifax. However, often the credit bureaus have distinct data from one another, so your credit score may vary too. When you apply for a new loan or credit card, the lender connects to one of the bureaus to get your credit report data. Finally, that data is run through an algorithm to determine your score.
What is a fico score?
A fico score is a credit score created by the Fair Isaac Corporation (Fico). Every lender will look into the borrower’s scores with FICO. A lender will also look into other details on borrowers like credit reports to evaluate credit risk and determine whether to extend credit. FICO scores- introduced more than 25 years ago, in 1995 and the most widely used credit score brands. Majorly 90% of the lenders prefer using FICO to check your report. The borrower applies the proprietary formula to gauge your creditworthiness.
FICO Score ranges
- 350-579: Very Poor Credit
- 580-669: Fair Credit
- 670-739: Good Credit
- 740-799: Very Good Credit
- 800-850: Exceptional Credit
Factors that contribute to FICO score
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
So, considering the above criteria, the credit score generated between a range between 300 and 850, the higher your score, the better credit. FICO also has a range of scores, based on the loan type. FICO Mortgage score, FICO Auto Score, and more. You can have dozens of different FICO scores, each with a different number.
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A key difference between Credit score and FICO score
- So, when someone refers to a credit score to you, they are referring to a three-digit number that represents a borrower’s history of returning loans and lines of credit. The credit score is generated- by applying the credit rating company’s algorithm like Vantage Score and FICO to a borrower’s credit report.
- A credit score and FICO score are measuring the same thing. FICO score a type of model used to get credit scores
- Your FICO score not your only credit score
SO, we hope you know the difference between them now and it plays an essential role in your credit history. Every company providing you with any financial help or their services will check your credit scores. Maintaining good scores has its benefits for you, so go ahead build a good credit score.
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