Did you know that only 1.2% of Americans have exceptional credit scores? This widespread use of the credit score has made it an important metric in many people’s lives.
Understanding the differences between a FICO score vs credit score can help you determine the best way to work with your credit. Here, we’ll go over the differences between these two aspects as well as which one is better. But first, let’s cover the basics.
What is a FICO Score?
The FICO score is a credit score developed by the Fair Isaac Corporation. It’s used by many lenders, including credit card companies, banks, and car dealerships, to help them determine whether to approve a loan and what interest rate to charge.
The FICO score is based on information from the borrower’s credit report, including their payment history, the amount of debt they have, and the length of their credit history. A high FICO score indicates that the borrower is a low-risk customer who is likely to repay their loan on time, while a low FICO score indicates a high-risk customer who is more likely to default on their loan.
What is Credit Score?
A credit score is a number that represents the riskiness of lending to a particular consumer. The higher the credit score, the lower the risk. The score is calculated using information from the consumer’s credit report.
This information includes the consumer’s payment history, credit utilization, credit mix, and length of credit history. A credit score is important because it is used by lenders to decide whether or not to lend money to a particular consumer.
A high credit score means that the consumer is a low-risk borrower and is more likely to repay the loan. A low credit score means that the consumer is a high-risk borrower and is less likely to repay the loan. If you have a low score, you can still get loans for bad credit from companies, just be sure you can repay your loans.
FICO Score vs Credit Score: Which One is Better?
They are both important measures of your creditworthiness, but which one is better for you depends on your specific situation. If you are looking to apply for a loan or credit card, your lender will likely use your FICO Score to make their decision. This score is based on your credit report from the three major credit bureaus and gives lenders a good idea of your credit history and repayment patterns.
On the other hand, if you are simply monitoring your credit health, your credit score may be a better metric to use. This score is based on the information in your credit report and gives you a snapshot of your creditworthiness at a specific point in time.
Ultimately, both FICO Score and credit score are important measures of your creditworthiness. Which one you should focus on depends on your financial goals.
Significance of FICO and Credit Scores
FICO score vs credit score is not the same thing. A FICO score is a type of credit score used by lenders to help them decide whether or not to give you a loan.
A credit score is a number used to help lenders decide how likely you are to repay a loan. If you’re considering a loan or line of credit, be sure to check your FICO score and credit score to get an idea of where you stand.
Do you want to find out more about your credit score? Check out more articles here on our blog!