FICO Scores vs Credit Scores: What’s the Difference?

If you have ever rented an apartment or applied for a credit card, mortgage or personal loan, then you already know that having a good credit score is important. For the small business owner, especially one who may, now or in the future, have a need for working capital support, a good credit score is critical to your company’s future success.

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Your credit score represents your creditworthiness; that is, the likelihood that you will be able to repay your financial obligations. It takes into account different factors in your credit history, but the higher your score is, the more attractive you are to financial institutions.

The credit score you earn (as a result of how well you manage and repay those financial obligations) is used by banks, credit card companies, and other lenders to assess the risk of lending money to you. The score not only affects whether or not you are approved, but also the terms and the interest rates you will be offered on your small business loan.

If you’ve ever had questions about credit scores, you’ve come to the right place. This article discusses the different credit scoring models, how FICO® scores differ from other credit scores, which scores matter, how they are calculated, and how you can find your own scores.

About Credit Scores

Because you may have heard individuals discussing their FICO score, you may mistakenly have assumed that a person has only one credit score. That is not true; the FICO score is simply the most common. Moreover, the computation of credit scores is, in fact, a lot more complicated than most people presume.

It is important to note that whenever you borrow money, lenders report your repayment history (whether you pay on time, or pay an amount over what is due, etc.) to the three major credit reporting bureaus, namely Equifax, Experian, and TransUnion. Because each lender can report to any (or all) of these bureaus, the analysis of the information that each credit agency has about you may be different. As such, your credit score at Equifax may be different from that at Experian or TransUnion.

FICO Scores

But what about that FICO score you keep hearing about? FICO (formerly known as the Fair Isaac Corporation, named after the company’s two founders, Bill Fair and Earl Isaac) is a major analytics software company that provides products and services to consumers and businesses. It is best known for producing the most widely used consumer credit scores that financial institutions use when deciding whether to lend money or issue credit.

Because the FICO score has been around the longest and because it is used by most lenders, many consumers assume that “credit score” and “FICO score” are one and the same. It’s not quite as simple as that, however. What makes things even more complicated is that there is no single FICO credit score. FICO itself has multiple scoring models, and lenders use different industry-specific versions for different credit products. For example, there is a required score for mortgages, another for credit cards, personal loans, installment loans and auto loans.

Equifax, Experian, and TransUnion may each have a different record for the same person, even if the three credit reporting agencies use the same FICO model. As such, an individual may have a different FICO credit score and that will depend, ultimately, on which agency the lender uses.

Moreover, the FICO scoring models change as FICO occasionally updates its model. Currently, there are four generations of “active” FICO models; namely, FICO 98, FICO 04, FICO 8 (the most widely used version), and the most recent release, FICO 9.

In 2016, FICO released the FICO Score XD. Unlike the other FICO models, Score XD uses alternative data to calculate the credit score. Alternative data refers to non-financial information that can be used to gauge the creditworthiness of a person. This alternative data can include rental payments, payments of utility and telecom bills, and electronic money transfers. Public records, such as personal property titles, property deeds and mortgages, tax or bank liens, licensing data, and tax records, may also be used.

The base FICO scores range from 300 to 850. Industry-specific scores, meanwhile, such as the FICO Auto Score 8 and FICO Bankcard Score 8, range from 250 to 900. Mortgage lenders typically use the older FICO versions (FICO 2, 4, and 5, depending on which credit reporting bureau they use).

Another notable FICO score is the FICO Small Business Scoring Service (SBSS) score, which is used when evaluating credit applications of small businesses. This score considers both the personal credit report of the business owner, as well as the business credit report and financial information of the company itself. The FICO SBSS score ranges from 0 to 300, with a higher score indicating less risk. Applications for SBA 7(a) loans not exceeding $350,000, for example, are pre-screened using this score.

Fico score

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Non-FICO Credit Scores

While some people use the terms “FICO score” and “credit score” interchangeably, FICO score is only one brand of credit scores. About 90% of lenders use FICO credit scores; the other 10% use other credit scoring models, generally those below listed.

VantageScore Credit Scores

In 2006, Experian, Equifax, and TransUnion introduced VantageScore as a joint venture. VantageScore is viewed as FICO’s biggest competitor; it is used by more than 2,200 financial entities (or approximately 6% of lenders). Just like FICO, VantageScore has updated its scoring model several times since its release. Its earlier generations (VantageScore 1.0 and VantageScore 2.0) produced scores that ranged from 501 to 990, but the newer generations (VantageScore 3.0 and VantageScore 4.0) both use a range of 300 to 850.

Generally, any consumer with a credit history will have a credit score. For the FICO score, an individual will need to have had one or more credit accounts opened for at least 6 months, and at least one of those accounts needed to have been reported to a credit reporting agency within the last 6 months. In contrast, VantageScore only requires a single month worth of data and an account reported within the last 24 months.

CE Score

A CE (Community Empower) credit score is a free score that used to be provided by through their partnership with CE analytics. It was the first completely free credit score on the market. The scores are calculated on data found on an individual’s Experian credit report. The score will range from 350 and 850; the higher the score the more “worthy” an individual is of credit. CE scores are usually on the lower side than other scores, with a score of 720+ being considered creditworthy.

Educational credit scores

Some credit scores were developed simply as a way to help consumers better understand and improve their own credit scores. Most were introduced before FICO began sharing more information about their model and encouraging lending institutions to share scores with consumers. To that end, many banks and lenders will show your FICO score on your online account, with notifications whenever the score has changed.

It should be noted that these so-called educational scores may be significantly less accurate than the actual FICO score and are, therefore, not often used by lenders when assessing a credit application.

An example is CreditXpert’s simulation score, which ranges from 350 to 850. Experian, Equifax, and TransUnion also offer individual credit scores, which are considered educational scores. Experian has the PLUS Score (which ranges from 330 to 830) and National Equivalence Score (which ranges from 360 to 480). Equifax has the Equifax Credit Score (which ranges from 280 to 850) and TransUnion has the TransUnion New Account Score 2.0 (which ranges from 300 and 850).

Other credit scores

Lenders may use alternative data instead of or as a supplement to FICO scores in order to have a better insight on consumers, especially those who are “hard” to score, such as individuals who have non-existent or insufficient conventional credit history.

Research suggests that including alternative data does not have a significant impact on consumers who are already scorable, but can make credit available to those who could not previously access it due to their limited credit profile. Alternative data also makes loans “smarter,” as the increase in data tends to decrease the number of bad loans that a bank or lender will have on its books.

Examples of credit scores that consider alternative data include:

  • SageStream’s Credit Optics Score; uses machine learning modeling methods on a mix of conventional and alternative data.
  • LexisNexis RiskView score; is based on a wide variety of public record information.
  • CoreLogic Credco’s Anthem Credit Score; reports on publicly available property records.
  • PRBC alternative credit score; allows consumers to report their own non-debt payment transactions.
  • ChexSystems score; for verifying financial accounts.
  • L2C (Link2Credit) score
  • Scorelogix LLC’s JSS Credit Score; evaluates credit risk based on income, job history, and the impact of economy.
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How are credit scores computed?

The formulas used to calculate credit scores are generally a “trade secret,” but the different companies and models look at similar factors when generating the credit score.

The classic FICO model considers the following data points:

  1. Payment history (35%) — A credit profile that shows you consistently make timely payments on your debt, as well as vendor credit, is a good thing. On the other hand, liens, bankruptcies, late payments, foreclosures, and repossessions can negatively impact your score.
  2. Amounts owed relative to credit limits (30%) — While it is fine to have several active credit accounts, using a large part of your available credit may suggest a cash flow problem and higher risk of defaulting.
  3. Length of credit history (15%) — A longer credit history raises your credit score, in general. Your score is affected by how long you’ve had your credit accounts (including the ages of your oldest and newest accounts and the average age of all your accounts), how long certain accounts have been established, and how long ago you’ve used certain accounts.
  4. New credit (10%) — Opening or attempting to open multiple credit accounts within a short period suggests a greater risk, especially for those who don’t have much credit history yet. It is prudent to avoid opening too many accounts soon after each other.
  5. Credit mix (10%) — The mix of credit cards, installment loans, finance company accounts, retail accounts, and mortgage loans. You don’t need to have all of them but it is an advantage if your record shows you can effectively manage different kinds of credit.

It is important to note that the weight of each category is not fixed for all consumers. If, for example, you don’t yet have a credit history, your score will be calculated differently compared to someone who has a longer, well-established credit history.

There are also other special factors that can affect the FICO score, such as money owed due to a tax lien or court judgment, especially if it is recent.

VantageScore, meanwhile, considers the following factors:

  • Payment history: extremely important
  • Type and age of credit: highly important
  • Percentage of credit limit used: highly important
  • Total balances and debt: moderately important
  • Recent credit behavior and inquiries: less important
  • Available credit: less important

FICO Scores vs Credit Scores

What do the scores mean?

Are you wondering whether your credit score is good or bad?

This is how FICO rates the FICO Score 8 credit scores:

Excellent: 800+

Very good: 740 to 799

Good: 670 to 739

Fair: 580 to 669

Poor: 579 and below

Meanwhile, here’s what the VantageScore 3.0 credit scores mean:

Excellent: 750 to 850

Good: 700 to 749

Fair: 640 to 699

Needs work: 300 to 639

What’s a Good Credit Score Range?

Data from September 2019 show that the average U.S. FICO® Score now sits at 706.

FICO score in the range of 690-719 is considered to be “good”. 720 and up is considered “excellent” and can give you access to the lowest interest rates offered. According to the recent data, less than 20% of scores fell below 600; 21.8% were between 600 and 699, and 22.3% were 800 or above.

What is a credit report and how is it used?

The overwhelming majority of lenders use FICO credit scores when evaluating whether to approve credit applications and what terms and interest rates to offer. Which specific FICO score matters will depend on the purpose of the credit. For example, if you’re applying for a car loan, the lender will be looking at your FICO Auto Score, but if you’re applying for a credit card, your FICO Bankcard Score will be considered.

Also note that the mathematical formulas used by other credit score providers differ from the ones used by FICO, so your non-FICO credit scores may differ by several points (even up to 100 points) from your FICO score. This can lead you to overestimate or underestimate your odds of getting approved, or incorrectly gauge the affordability of the interest rate you may be offered.

It is a good idea to regularly check your FICO credit score and do what you can now to boost it if it needs improvement or to fix any errors that have been reported.

Each year, every US consumer is legally entitled to one free credit report from each of the three major credit reporting agencies (visit the website to request your report). Experts recommend that you request one report at a time, over the course of the year (say at a four month interval) so that you can see how the data has changed or if your requested corrections have been made. Consumers are permitted to request a review of a report if they believe it contains an error; for example, if a tax lien is still showing as active which has been repaid, or you can address an issue if late payments on a loan are due to extenuating circumstances. It is important that you follow the instructions for correcting the report which may be different, depending on the credit reporting agency.

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What’s included in your credit reports?

There are three major credit reporting agencies and there is no uniform formatting for credit reports. Nevertheless, each report include the same types of information about you and your credit history.

In most cases, your credit report will include the following information:

  • Personal Identification Information – personal information such as Name / Date of birth / Social Security number / Current and previous addresses and phone numbers / Current and previous employer / Other identifying information required in order to associate your identity with your credit.
  • Tradelines and Collections – all accounts you currently have open with banks, credit card companies, and any other lenders, as well as accounts you have closed in recent years (as long as the lenders reported those accounts to the bureau). Closed accounts remain on your credit reports for a period of time (usually up to seven years for negative accounts and ten years for positive ones). Each account has a “Status” field that shows whether the account is open or closed, and the current payment status or the status when the account was closed.
  • Bankruptcies – if there are negative public records available about you and your credit history, such as bankruptcies, tax liens and civil judgments, you will find it in this part of the report.
  • Credit Inquiries – This section of the credit report lists all the inquiries from companies checking your reports in the last two years. Here you will see details of all the lenders and creditors that received copies of your credit report from that bureau.
  • Consumer Statements/Alerts/Disputes – This section includes any consumer statements, fraud alerts, or credit report disputes you’ve made. You may not see any of these sections if you don’t have any of the relevant information on your reports.

The Bottom Line

Each US consumer will have multiple credit scores. Which one the lender uses will depend on several factors, such as the credit bureau providing the report, the purpose of the borrowed money (e.g. credit card application or car loan), and whether the lender uses the industry standard FICO scoring model or something else.

About 9 out of 10 lenders use FICO scores when evaluating loan and credit applications. A VantageScore credit score, however, is faster to generate; a consumer can have a VantageScore score after just a month of data while a FICO score requires at least six months’ worth of data.

Whether or not you have a need for financial support for yourself or your business, now or in the future, it is important that you be absolutely certain that your credit scores accurately reflect your creditworthiness. Because you are able to obtain a free copy of your credit history each year, it is important that you take the initiative to request it and scrutinize it. Understand, too, that it takes times to correct reporting errors, and that could be time you may not have if a financial emergency arises. Don’t presume the truth is being reported about you, especially when it comes to the “alternative data;” if something is incorrectly reported, make the effort to request a correction.


1. How are credit scores computed?

The classic FICO model considers the following data points:

  • Payment history (35%)
  • Amounts owed relative to credit limits (30%)
  • Length of credit history (15%)
  • New credit (10%)
  • Credit mix (10%)

2. What’s included in your credit reports?

In most cases, your credit report will include the following information: Personal Identification Information, Tradelines and Collections, Bankruptcies, Credit Inquiries, Consumer Statements/Alerts/Disputes

3. What is a credit report and how is it used?

In most cases, your credit report will include the following information: Personal Identification Information, Tradelines and Collections, Bankruptcies, Credit Inquiries, Consumer Statements/Alerts/Disputes

4. What do banks see when they do a credit check?

FICO score in the range of 690-719 is considered to be “good”. 720 and up is considered “excellent” and can give you access to the lowest interest rates offered.