What’s your FICO Score?
No matter if you’re in the lofty 800+ range or toiling in the 500’s, the answer should always be, “It depends.”
That’s because there isn’t just ONE FICO Score, but a series of scores based on different scoring models. FICO – founded as the Fair Isaac Corporation back in 1956 – is the preeminent credit scoring service in the U.S., responsible for countless millions of lending decisions every single day.
In fact, there are scores of separate versions of FICO scores based on the lender’s purpose for pulling credit, so it’s most useful in those decisions. Even the range of FICO Scores may vary from 250-900 (for industry-specific FICOs) compared to 300-850 for the base version of FICO.
Remember, too, that Experian, Equifax, and TransUnion – the nation’s Big Three credit scoring models – all use different versions of FICO Scores for their credit models.
Let’s take a look at how those work by need, industry, and the purpose of the loan:
(This information is direct from FICO’s www.MyFico.com)
It’s important to note that when FICO releases a new version of their scores, it doesn’t necessarily means that the credit bureaus and lenders will start using it immediately. In fact, it may take many months or even years for these new FICO products to be instituted, if at all.
For instance, let’s take a look at the difference between FICO 8 and FICO 9.
FICO Score 8
With the rollout of FICO 8 several years ago, there were some key features and improvements.
Those included factoring in high credit utilization rates to their risk assessment, isolating late payments, so a one-time missed payment won’t hurt your score as much if your other accounts are all in good standing.
They also don’t penalize consumers as readily for collections of less than $100, or “small-dollar nuisance” collections accounts.
But FICO 8 also diminishes the benefit to being an authorized user on someone else’s credit card, as they discourage “tradeline renting” just to improve your score.
FICO Score 9
FICO has a most recent version of their scoring model, called FICO Score 9. It, too, features some important updates that aim to help the accuracy of credit reporting and risk assessment.
For instance, collections from third parties that have been paid off no longer factor in as negative items that drag down your score.
Medical collections are also considered a different animal than other forms of debt and will have less of a negative impact.
And as a useful benefit, FICO Score 9 will factor your clean rental history into their scoring model, when such data is available. That helps hundreds of thousands of consumers who are “credit shy” and need more positive tradelines to build up their scores.
So, which version of FICO Score is most important to you?
That depends on what you’ll use it for!
If you’re looking to buy a new car so you need an auto loan, you’ll want to focus on FICO Auto Score.
Applying for a credit card and you want the best rates and a high credit limit? FICO Bankcard or FICO Score 8 is most commonly used by credit card companies when gauging consumer risk.
Buying a home so you need to apply for a mortgage? The FICO standard version widely used even before FICO Score 8 came out is still the most popular with banks and lenders when it comes to home loans.
Contact Blue Water Credit if you have any questions about your FICO Score or need a credit score boost!