Which is of more importance... Credit score or FICO score?

Submitted by lostrikan24 on Wed, 07/09/2008 - 06:16

Will you allow your kids use your credit card? The answer is ‘No’ because your kid is not aware of how to use this. So whether an individual has adequate knowledge of managing credit is a matter of question from credit grantors’ perspective. Credit scoring is the mechanism to verify if an individual is capable to manage the credit in a proper manner. This is important for the creditors because they must be willing to know how much risk is there if they lend money to a particular person.

Mortgage lenders, auto loan companies, credit card issuers put much weight on credit scoring. This helps them decide the rate of interest, credit limit and many more important aspects of the transaction.

Credit scoring models are developed on the basis of consumers’ data. One behavioral report is compiled based on statistical formula. Different creditors can use different scoring model or they can take help of some credit scoring companies. The most widely accepted scoring model is developed by Fair Isaac. Hence it is also known as known as FICO score. All the major credit bureaus use this model to calculate your score. Usually creditors compare the output of their own system with that of a common credit scoring company.

Credit bureaus do offer their own score. The score developed by TransUnion is known as ‘TransRisk’ and that of Experian is known as ‘ScoreX’. There are creditors who like to concentrate on these bureau-specific scores because:

  • These scores are comparatively cheaper than FICO.
  • These scores often go very close to the risk factor in reality.

Most banks, mortgage lenders and other credit grantors build up their own modules to calculate credit score as well.

But it have been often noticed that the score computed on the basis of the formulae provided by FICO may vary from one bureau to another. Lenders tend to discard the upper and the lower score and use the middle one while calculating an individual's creditworthiness. Hence on 14th March, 2006 the three bureaus announced the rolling out of a new scoring model called the VantageScore. Its a new model and is intended to reduce the difference as much as possible.

Since the model developed by FICO, is based on statistical data it is expected to give accurate information than just a prediction. Credit scoring model is supposed to give unbiased result. The Equal Credit Opportunity Act, enforced by Federal Reserve Board’s Regulation B, strongly opposes discrimination on the basis of race, skin, sex, marital status, religion and nationality. So the statistical method to calculate credit score can never consider these factors to be part of credit scoring.

We seem to talk all the time now...lol. Mind if I type GN for short? And why do our avatars change all the time? Anyways, I will research some of the ins and out of the two sides and post a review soon. Thanks for replying!

Thu, 07/10/2008 - 03:06 Permalink

Don't mind what you call me, LOL.

I look forward to reading your post after you do your research, have fun with this task.

I am not sure why the avatars change, sometimes I end up with some really goofy ones and other times they are just plain out there! LOL.

Thu, 07/10/2008 - 03:30 Permalink

EACH CS is equally important & goodnatured your avitar chages b/c you havent set a perminet one yet.

Thu, 07/10/2008 - 07:21 Permalink

As far as I know, FICO score itself is a credit score which is developed by Fair Isaac and company. All the three credit reporting agencies depend on the FICO method to calculate the credit score. The FICO score is based on the credit history and other factors in the credit report of each of the three bureaus. As a result, there are three FICO scores.

Thu, 07/10/2008 - 09:27 Permalink

Hi lostrikan24,

I believe the biggest difference between the two is that a FICO score is used by most lenders to determine your availability for credit while a "credit score" is usually just a generic version of your FICO score that some places like credit monitoring companies use to make you think you know where your credit stands.

I've always been a firm believer that you shouldn't be concerned with your scores at all. Your score itself is not the only thing that determines your eligability for credit. You should be more worried about what is in fact showing on your credit report and that it is accurately being reported.

There are too many people out there with poor credit that will pay someone to view their credit scores quite often when that money could be better used to help you pay down your debts and get your credit back on track.

But I'm no "all-knowing master" so I'll be curious to see what your studies find...

Best of luck

Fri, 07/11/2008 - 03:29 Permalink

yes chass, you are right. There is no big difference between a FICO score and a credit score. Credit score is a common term while FICO score itself is a credit score which is used mostly by the creditors for determining your credit worthiness.

Fri, 07/11/2008 - 11:34 Permalink

Are they not the same score or very similiar? I hear both terms in reference to your credit, but never really questioned the difference between the two.

Sat, 07/12/2008 - 00:59 Permalink

Actually, FICO score is a type of credit score. The basis of calculating FICO score was developed by Fair Issac based on certain standards and so it is also known as FICO score. Credit score is a general term as said by Mary and FICO score is itself a type of the credit score.

Sat, 07/12/2008 - 11:41 Permalink

If they are the same, "or similiar", then why call it a different name? I've had people try to explain the difference to me.........I guess I just 'don't get it.' A score is a score..........no matter how you look at it.

Tue, 07/15/2008 - 04:39 Permalink

Two different origins I guess, you say potato, I say patawto, LOL. You get the picture.

Wed, 07/16/2008 - 14:49 Permalink

How many different types of credit scores are there? Does anyone know, if FICO is just one.

Fri, 07/18/2008 - 14:26 Permalink

initially I thought there was only one, "The credit score", LOL, guess you learn something new everyday.

Sat, 07/19/2008 - 18:16 Permalink

Well, I never heard of anything but the "credit score", until I came here then I see FICO.

Sat, 07/19/2008 - 18:51 Permalink

Coming here I have found out there is alot I really don't know and should.

Sat, 07/19/2008 - 19:03 Permalink

I know every now and then something pops up that I did not know.

Sat, 07/19/2008 - 20:36 Permalink

I was just laughing about that myself. Recently some abbreviations came up that have left me stumped. Still waiting on answers to those.

Mon, 07/21/2008 - 01:24 Permalink

I know, I don't know a few of the abbreviations either, I try to put the meaning in parenthesis if I am going to use them.

Mon, 07/21/2008 - 02:33 Permalink

Thats a good idea. I just found something interesting online. did you know that PA is the only state that doesn't publish its debt collection code online. It says you got to go to a library to look it up or call the atty (attorney) gen. (general) office to find out.

Tue, 07/22/2008 - 18:11 Permalink

As far as I know, there are two types of credit score - one is the FICO score and the other is the Vantage score. Vantage score is a new credit scoring model created by the three credit bureaus. In vantage score, the credit score ranges from 501 to 990 with higher score denoting low risk profile customers.

Thu, 07/24/2008 - 07:29 Permalink

Sounds alot like the one they usually use. What number would you say is a good score? I know in the 900 would be great but my hubbys is in the 700 mark and I think thet sounds good.

Fri, 07/25/2008 - 00:29 Permalink

sounds good to me, I am not sure that I have ever heard of anyone having 900.

Fri, 07/25/2008 - 03:00 Permalink

now, get off the Bush kick, someone else will take over here shortly and I think that us working folks will be paying out even more to keep those who choose to sit on their rear ends and have us supporting them.

Mon, 07/28/2008 - 02:49 Permalink

This is true. I just actually wonder which score is more impartant the FICO or credit. And why do we need so many scores anyway. Just like now there is one m ore credit reporting agency. Innovois...why do we need one more to complicate matters. They can not be that beg of an outfit if the federal giverment is not making them hand out a free report. Not onlly that when you hear people taliking about reports it is a name not mentioned.

Tue, 09/09/2008 - 01:48 Permalink

I thought FICO score and credit score are the same.. :?

Thu, 09/11/2008 - 02:45 Permalink

Hi mirage
FICO score is a type of credit score which is used by most of the creditors to judge your creditworthiness. It is a credit scoring model prepared by Fair Issac corporation. However, there is another type of credit score know as Vantage Score which is being prepared by the three credit bureaus to overcome difference in the credit score which is now found among the FICO score of the three bureaus. Both FICO score and Vantage score are different credit scoring models.

Thu, 09/11/2008 - 07:25 Permalink

It depends on you are looking at it or how the credit reporting agency calculates the score.

Sat, 09/13/2008 - 00:37 Permalink

I agree with Anthony. However, the creditors mostly determine the creditworthiness of the borrower depending upon the FICO score. Since the FICO score sometimes varies among the credit bureaus, borrowers often use middle credit score and average credit score to determine the borrowers creditworthiness. Average credit score is mostly used by sub prime lenders who lend money to people with very low credit score.

Thu, 09/25/2008 - 10:38 Permalink

From what I understand, a FICO score is like an 'average' of your credit score. However....to be honest, I'm still a bit 'fuzzy' on the difference.

Thu, 12/18/2008 - 03:49 Permalink

Credit score is a general concept of measuring your creditworthiness by taking into account different factors in your credit report. The concept was developed by Fair Issac Corporation and so it is also known as FICO score. Lately another scoring model has been developed by the three credit reporting agencies of US, known as vantage score. In vantage score, the score ranges from 501 to 990 and does not use the concept of authorized user thereby reducing the risk of the borrowers.

Thu, 12/18/2008 - 08:40 Permalink

Vantage Score??!!......who, in the world, can keep up with all the way that they determine your 'worthyness'. Does a Vantage Score actually come up on a CR that the lender may get for you? You said, CAROL, that the Vantage Score can actually HELP someone who has bad credit? Can you explain, a bit more, how they (CB's) determine what you VS may be? What are the 'factors', etc?

Fri, 12/19/2008 - 06:00 Permalink

FICO SCORE is the score that is mostly used by the creditors to help them decide whether to grant the loan application. FICO SCORE is the score that is being calculated whatever is in their credit report, giving the lenders the chance to review what is their payment behavior,how they pay certain debts. As a matter of fact, fico score is widely used and you can only obtain it through one of the major credit reporting agency.

Sat, 02/14/2009 - 10:14 Permalink

There are two different types of credit scores. They're the FICO score and the Vantage score. FICO score has so long been used by the lenders to judge the creditworthiness of the borrowers. Now, since the score vary across the three bureaus, the bureaus have developed Vantage score which is still not in use. However, recently, I found that Experian has decided to discontinue offering FICO score to borrowers, but it will continue to offer FICO score to the lenders. Debtors can only get FICO scores from the other two bureaus - TransUnion and Equifax.

Fri, 02/27/2009 - 07:27 Permalink
matzcrorkz (not verified)

mVLkXg Really informative post.Much thanks again. Much obliged.

Tue, 08/05/2014 - 08:56 Permalink