FICO® Score vs Credit Score
Banks, lenders, credit card issuers, auto lenders, etc. use credit scores to decide what interest rate, loan, rebates & credit card terms to offer you if any. Your score is vital to you because it determines how much money you can borrow, how much interest you’ll pay, and what payment terms you’ll receive.
For business owners it’s just as important. Although it’s crucial to establish the creditworthiness of your business; having strong personal and business credit scores opens you up to much more funding opportunities. For example, to acquire unsecured lines of business credit that only report to your company’s business credit reports requires that the business owner or credit partner have a strong FICO® Score.
It’s like your credit grade point average (GPA). It indicates the measure of your credit achievements so lenders can quickly assess your current credit health. A strong score can save you thousands of dollars by enabling you to gain access to the best rates, loans, rebates, and premium credit cards.
With that said, I want to clear up the confusion between FICO® Scores and credit scores. I’m sure you’re just as tired as I am seeing all the free credit score offers circulating on the internet and TV commercials. While I am glad to see that this is creating a much greater awareness about knowing your scores, it also has caused a great deal of confusion too!
Credit scores come in a variety of shapes and sizes but what matters at the end of the day is that you know which score the majority of lenders actually use. It doesn’t help if you obtained a free credit score which ended up being a TransRisk score, VantageScore®, or educational score and the lender you plan to apply with doesn’t use those scores.
For example, consumers like Abbie Steed found herself house hunting and needing a loan. She paid $30 to get her scores from freecreditreport.com only to find out from the lender that her FICO® Score was nearly 100 points lower.
So if you’re planning to apply for credit or a loan or any type of financing you should be concerned about your FICO® Score. It’s the score that really matters.
Why only focus on the FICO® Score?
The bottom line is the majority of lenders, banks, credit card issuers, and auto lenders use them. It is basically the global standard for measuring credit risk in the banking, credit card, mortgage, auto and retail industry. Did you know more than 90% of lending decisions are based on FICO® Scores? Here are some factual numbers that back up what I’m saying:
FICO Score vs Credit Score Facts
- 90 of the top 100 largest U.S. financial institutions use the FICO® Score to make credit decisions.
- The top 50 financial institutions use FICO® Scores.
- The 25 largest credit card issuers and auto lenders in the U.S. use FICO® Scores.
So before you apply for credit you should consider obtaining your actual FICO® Score. Only MyFICO®, the consumer division of FICO™ (Fair Isaac Corporation), can provide your FICO® Scores based on data from Equifax, Transunion and Experian.
Obtaining your score from MyFICO® ensures that you know where your actual FICO® credit score really stands before applying for credit or a loan.
On a final note, although there are over 50+ FICO® Scores that only lenders, credit card issuers, banks, and auto lenders have access to such as the FICO® Mortgage Score, the FICO® Bankcard Score, the FICO® Auto Score, etc. The only score you can obtain as a consumer is your Consumer FICO® Score. (Generic FICO® Score)
Until next time…
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.