If you’ve applied for a new credit card or mortgage or car loan recently, you might know that lenders use your credit score to help determine whether to give you the loan. You may have heard the term “FICO score” as well. And you may have the term “credit report.” Are these all the same thing?
Well, no. But they are all interrelated, and sometimes they are used interchangeably, even by those in the very financial institutions that are evaluating your credit history.
So, here’s the deal:
First, anyone that has ever had a credit card, mortgage, or car loan has had their history of payments (or non-payments) recorded by the lender and reported to one or more of the major credit bureaus — Equifax, Experian, or TransUnion. If you get your credit report from one of these agencies (get a report free at ), you will see a history of current and past credit and loan accounts, including balances due and a history of payments (or at least a tally of missed payments).
This raw data is your credit report — but it’s not a credit “score”. Where does that come from?
This is where FICO comes in. The concept of a credit score was invented by the Fair Issac Company, FICO for short. FICO came up with a formula that takes into account your history of credit and loan payments, types of credit, number of years you’ve been using credit, plus and calculates an actual number or “credit score” between 300 and 850. The higher your score, the better.
FICO then began to market the credit score concept to the credit reporting agencies and to lenders, and did so very successfully. When lenders want to quickly check on the creditworthiness of potential customers, they go to one of the credit reporting agencies, which supply them with a credit history of the customer, and, most important, the customer’s credit score. In most cases, the major reporting agencies supply the lender a credit score that is a version of the FICO score based on the credit data that particular agency has in its files. (The credit bureaus may have slightly different data on you based on whether or not a lender reports to all agencies or just one.) The agencies don’t all call it a FICO score, but it is generally recognized that the calculation is based off of the Fair Isaac Company formula, which the credit reporting agencies have licensed in order to improve their offerings to lenders.
So, you might think a FICO score and a credit score aren’t much different, and in many cases, you’d be right. However…
In 2006, Experian, Equifax, and TransUnion teamed up to come up with their own credit scoring formula, so they wouldn’t have to keep paying FICO to use their formula. They came up with something called the VantageScore, which now competes with the FICO credit score. Because most lenders have a history with the FICO score, most have not switched to the VantageScore to make their lending decisions. However, because the VantageScore is being marketed to lenders by the major credit reporting agencies, it is impossible to know whether the VantageScore will become more “legitimate” over time.
So, it is possible (though not probable) that your lender may be using your VantageScore instead of your FICO score to make decisions about your credit card or loan. Thus, not all credit scores are FICO scores, because there is another credit scoring system out there. Nevertheless, because FICO is the dominant credit scoring formula, many people continue to say “FICO score” to mean “credit score” and vice versa.