A credit score is the number that summarizes your credit risk. It is determined by your credit data. A credit score assists lenders in evaluating your credit profile and impacts the credit accessible to you, such as loan, credit card approvals, interest rates, credit limits, and other factors.
Is a FICO score the same as a credit score? The short answer is no. You will likely come across a different number for credit scores, depending on what institution you obtain your score. In Canada, we have two major credit reporting agencies, Equifax and TransUnion. The main reason these two companies will give you different scores is that they have other measuring models. Below is a breakdown of how FICO measures your creditworthiness.
How the FICO score is calculated (approximately) :
- Payment History (35%)
- Level of indebtedness/Amounts owed (30%)
- Length of credit history (15%)
- Types of credit used (10%)
- New credit accounts (10%)
Fair Isaac Corporation created FICO scores. These are the most commonly used scores, used in over 90% of lending decisions. Equifax previously referred to FICO Scores as BEACON Scores. This model ranges from 300-900; the lower the score, the higher the risk. Next to FICO, the biggest credit score competitor would be VantageScore, also used to determine creditworthiness. VantageScore has been developed by the three American Credit Reporting Agencies: Equifax, Experian, and TransUnion.
Although they are all credit scores, the score you receive from each will be different. If you have your score checked for a mortgage loan, you will get one score; for a credit card application, you might get a completely different score. It depends on what Credit Reporting Agency they use as well as what score brand.
After reading the above information, it should be apparent that you do not have a single credit score. You have a lot. Lenders may use hundreds of different credit scores between the many FICO and VantageScore versions to analyze you. Even though those scores may differ, there are similarities in the scoring methods. Please refer to the chart.
|Credit Score Range||Founders|
|Same Objective||Minimum Scoring Criteria|
|Credit Score Factors||Credit Score Value|
If you have any difficulties understanding FICO or Credit Scores and need help or advice, please reach out. From explaining the benefits of increasing your score to simply explaining your score, we at Dominion Lending Centres NasaKasa are always here to help.