The following post has been sponsored by our partner, FICO. The analysis and opinions in the story are our own and may not reflect the views of FICO.
Keeping up with your credit is crucial if you want to qualify for a home loan, an auto loan or even a credit card with the best rates and terms. However, it can be difficult to know which credit score you should monitor. After all, there are several credit scoring models from different organizations out there, with some geared to financial products like auto loans or credit cards and others geared to a broader range of types of credit.
Since FICO Scores are the most widely used by 90 percent of top U.S. lenders, this is probably where you’ll want to focus your time and energy. Yet you should also know that different types of FICO Scores exist to meet unique lender and consumer needs.
If you’d like to know more about the various versions of FICO® Scores out there, you have some reading to do. This guide will explain the different types of FICO credit scores, how they’re used and which type of score you should pay attention to the most.
The basics: What is a FICO Score?
A FICO® Score is a credit score model from Fair Isaac Corporation that is used by thousands of lenders to help them assess the credit risk of individual consumers. It’s a three-digit number ranging from 300 to 850, where higher is better (industry-specific scores use a slightly broader range of 250 to 900), and has been the industry standard since the product’s founding in 1989.
Tom Quinn, vice president of Scores at FICO, says that there are numerous versions of FICO credit scores because they are periodically redeveloped to incorporate new analytic tools. Through the updating process, FICO releases new FICO Score versions to the market, at which point lenders determine if they’re going to migrate to a newer version of the FICO® Score or continue using the version they are currently using.
In addition, there are FICO® Score versions tailored to assess the credit risk for specific types of financial products. In addition to the base model, which is designed to predict the general risk of any credit obligation, Quinn points out that there are industry-specific versions focused on auto and bankcard risk.
According to myFICO.com, the industry-specific FICO credit scores leverage all the predictive power of the base FICO® Scores “while also providing lenders a further-refined credit risk assessment tailored to the type of credit the consumer is seeking.”
By offering auto-specific and bankcard-specific FICO® Scores, FICO has managed to tailor its products and provide more clarity to the lenders who use them.
“And then we have three bureaus, so you multiply everything by three,” says Quinn.
That’s right; each of the three credit bureaus—Experian, Equifax and TransUnion—assigns consumer credit scores based on the unique information in their credit reports. This means someone may have a different FICO® Score among the different models and a different score from each of the credit bureaus.
What are the different FICO Scores?
The most common FICO credit scores are detailed below, along with which credit bureau and for what type of credit they’re used:
| Score | Experian | Equifax | TransUnion |
|---|---|---|---|
| Most widely used | FICO® Score 9 FICO® Score 8 | FICO® Score 9 FICO® Score 8 | FICO® Score 9 FICO® Score 8 |
| Used in auto lending | FICO® Auto Score 9 FICO® Auto Score 8 FICO® Auto Score 2 | FICO® Auto Score 9 FICO® Auto Score 8 FICO® Auto Score 5 | FICO® Auto Score 9 FICO® Auto Score 8 FICO® Auto Score 4 |
| Used in credit card decisioning | FICO® Bankcard Score 9 FICO®Bankcard Score 8 FICO®Score 3 FICO®Bankcard Score 2 | FICO® Bankcard Score 9 FICO® Bankcard Score 8 FICO®Bankcard Score 5 | FICO® Bankcard Score 9 FICO® Bankcard Score 8 FICO®Bankcard Score 4 |
| Used in mortgage lending | FICO®Score 2 | FICO®Score 5 | FICO®Score 4 |
| Newly released | FICO® Score 10 FICO® Auto Score 10 FICO® Bankcard Score 10 FICO® Score 10T | FICO® Score 10 FICO® Auto Score 10 FICO® Bankcard Score 10 FICO® Score 10T | FICO® Score 10 FICO® Auto Score 10 FICO® Bankcard Score 10 FICO® Score 10T |
Quinn says the average person who is not in the midst of a specific loan transaction should focus their attention on the FICO® Score 8 “because that’s the most commonly used score across all the various lenders out there.”
You’re likely to have your FICO® Score 8 pulled if you apply for personal loans, student loans or retail credit specifically. However, it’s possible your FICO Score 8 will be pulled in nearly any credit transaction, including an auto loan application.
Which FICO Score should you care the most about in specific situations? Consider the following:
- You want to get a mortgage or refinance your current home loan: Quinn says anyone who is hoping to get a home loan or refinance their mortgage in the next three to six months should focus on FICO® Scores 2, 4 and 5.
- You plan to apply for an auto loan: If an auto loan is in your new future, you should focus on the auto industry FICO® Score options.
- You need a new credit card: Consumers in the market for a new credit card should find out their FICO® Bankcard Scores or focus their energy on FICO® Score 8.
How to plan when you need to improve your credit
If you’re someone who would like to have a higher score, you may feel overwhelmed about where to start. Fortunately, the main steps you can take to improve your credit will help regardless of which version of your score is pulled.
According to Quinn, the first step anyone can take to improve their credit is getting any delinquent accounts they have into current status. For the most part, this means catching up with the minimum payments on your bills so they are no longer listed as currently “late.”
“Your score is still going to be on the lower end of the spectrum if you have delinquency, but being currently delinquent is much more harmful,” he says.
From there, Quinn says paying bills on time is critical to having a good score, and that seems to make sense to most people. However, you’ll also want to be conscious of your debt load, including your total debt amount and how much of your available credit you’re using.
“If you have two credit cards and you’re currently maxed out on them or close to it, that’s going to be indicative of higher risk and impact a credit score,” he says. “So, trying to reduce those balances so that your utilization ratio decreases is important.”
Other factors to pay attention to include the length of your credit history as well as your pursuit of new credit and your credit mix.
Generally speaking, Quinn says you should only apply for credit when you absolutely need it, and that will help.
Next steps
While each lender determines what is an acceptable score for their credit criteria, most lenders will consider FICO Scores in the upper 600’s and greater to be acceptable. You’ll have a better chance at qualifying for the top rewards credit cards and home or auto loans with the best rates and terms if you can get your score in the mid-700’s and greater—which includes FICO Scores of 760 or higher. This is above the average of U.S. consumers and demonstrates to lenders that the borrower is very dependable.
Fortunately, there are multiple ways to get a free look at your credit score. For example, Experian offers a FICO Score 8 with its free credit monitoring service. Many lenders participate in the FICO® Score Open Access program that enables them to provide their customers with access to their FICO Score for free. Along with the FICO® Score, lenders also share insights into the score and credit education content to help customers understand their credit health.
Sure, when it comes to credit scoring and FICO scores, there's quite a bit to unpack. FICO Scores, developed by the Fair Isaac Corporation, are fundamental in assessing an individual's creditworthiness. They've been around since 1989 and are used extensively by lenders across the U.S. These scores, ranging from 300 to 850, help lenders gauge the risk associated with lending to a particular individual.
The FICO Scores aren't static; they evolve through periodic updates and new versions released to incorporate improved analytics. These versions cater to specific lending purposes, such as auto loans, credit cards, and mortgages. For instance, the FICO® Score 8 is widely used across various lending sectors, while industry-specific versions like FICO® Auto Scores and FICO® Bankcard Scores cater to the unique risk assessments associated with auto loans and credit cards, respectively.
The unique aspect of FICO Scores is their variation across the three major credit bureaus: Experian, Equifax, and TransUnion. Each bureau computes its FICO Scores based on the information present in their credit reports. Hence, an individual might have different scores across these bureaus and also across the various FICO Score models.
Now, let's delve into the different types of FICO Scores highlighted in the article and their respective uses across the credit bureaus:
- FICO® Score 8: Widely used across various lending sectors.
- Auto Industry Scores (FICO® Auto Scores): Tailored specifically for auto loans across the three bureaus.
- Credit Card Scores (FICO® Bankcard Scores): Geared towards credit card decision-making and also vary across the bureaus.
- Mortgage Scores: Versions like FICO® Scores 2, 4, and 5 are crucial for individuals seeking home loans or refinancing.
Each FICO Score caters to specific lending scenarios. For instance:
- Home Loan or Refinancing: FICO® Scores 2, 4, and 5 are crucial.
- Auto Loan: Focus on auto industry-specific FICO® Score options.
- New Credit Card: Check FICO® Bankcard Scores or the FICO® Score 8.
Improving your credit score involves various steps, irrespective of the FICO Score version lenders use. These steps include bringing delinquent accounts up to date, paying bills on time, managing debt by reducing balances, being cautious about credit utilization, maintaining a healthy credit history length, and being strategic about applying for new credit.
Aiming for scores in the mid-700s or higher significantly improves the chances of qualifying for better loan terms and top credit cards. You can access your FICO Score through various channels, including credit monitoring services and lenders participating in the FICO® Score Open Access program, providing customers free access to their scores along with credit education content.
Understanding these nuances helps individuals make informed decisions about their credit health, aligning their focus on the most relevant FICO Score for their specific financial goals.
