What is a FICO Score? How is it calculated?

What is a FICO Credit Score?

FICO is an acronym, it stands for Fair Isaac Corporation, which is the most widely used credit scoring model in the US. It uses a mathematical formula developed by the Fair Isaac Corporation, and was designed to help lending institutions and other credit companies determine the risk of lending money, or issuing credit to their potential customers.

Here’s how it works: Your credit report is pulled using one of the “big 3” credit reporting agencies listed below, that information is run though the FICO scoring model, and out comes your FICO credit score.

Fair Isaac has also helped develop some of the credit scoring models used by the “big 3” credit reporting agencies – Experian, Equifax, and TransUnion.

Although similar in design, the scoring models used by each company listed here are said to have their own unique way of determing credit worthiness, and the overall “score” of your credit. However, they still work with Fair Isaac to help develop the formula, and are all recognized as being reputable and reliable.

Similarly, most large banks also develop their own scoring model to suit their specific needs, usually in conjunction with FICO.

One thing you must keep in mind is that – along with having their own scoring models – those credit reporting agencies will also offer you the option of viewing your FICO score based on your credit report from that agency. For instance, Equifax offers its customers the option of viewing their FICO score based on their Equifax credit report. So this example would still be a true FICO score.

FICO – King of the Credit Scoring World

Even though there are many other credit scoring models meant to compete with FICO, none of them are even close to being used as widely as “King FICO”. These “other” scores are usually cheaper to buy, but if you’re looking for a “true” FICO scores, they’re not what you’re looking for! So when searching specifically for your FICO credit score, make sure you look for the word “FICO”, otherwise you may not be getting what you are looking for. Or better yet, just go straight to FICO’s website and order your credit score direct.

For more information on credit scores, and how the score is determined, check out our credit score article.


External Links:

Official FICO Website (opens new window)

 


 

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