FICO Scores Vs. Credit Scores - The Difference Between the Two Scores You May Not Know About

The three main Credit Reporting Agencies are Experian, TransUnion, and Equifax. Since some lenders only report to one of these three companies, you will probably have three different Credit Reports based on the different information each one has about you.

When you hear about "FICO Scores" and "Credit Scores" it's important to understand the difference.  FICO Scores are built by Fair Isaac Corporation from each agencies Credit Reports. Because you may have different Credit Report Data filed in each agency, you will probably have three different FICO scores.

When you sign up for one of the Credit monitoring Products, ("Free Credit Report" products), they will offer you an estimated Credit Score, however this will not be your true FICO Credit Score.  Each agency has created a way to simulate your FICO score using there own scoring method.  By now if you have kept track you have six Credit Scores (FICO Scores from each agency, and simulated credit scores from each agency)!  Not to worry, this can be used to your advantage.

How to take advantage of different Credit Scores from Different Agencies

Since most lenders will only use one Credit Agency (to save money) to get your FICO score, you can run your FICO credit scores from MyFico.Com, figure out which agency you have the highest FICO score with, and then find a lender that only uses that one.  For example, if you are buying a car and you know that they will run your Credit Report and Score, ask them which agency they use.  If they dont use the one where you have the highest score, find another dealership that does, especially if there is a large difference in Credit Scores.  This may save you a lot of money on interest for both leases and Financing of new cars!

Why even the Rich Can Have Low Credit Scores

The methods of calculating your FICO may differ slightly depending on the credit bureau. When obtaining your score from one of the Credit Bureaus it is important to understand that your score does not come directly from FICO. It is adapted to each bureau and is given its own name: Equifax uses "Beacon", Trans Union uses "Empirica", and Experian uses "Experian/Fair Isaac." These scores are also referred to as your "Bureau Scores." Since your score is derived from your bureau data, it will change every time your reports change. However your score is calculated, it will always take into consideration many categories of information. No one piece of information or factor determines your score. As the information in your credit report changes, the importance of one or several factors may change in your FICO score.

Lenders look at many things when making a credit decision, including your income and the kind of credit you are applying for. However, your FICO score does not reflect these facts as it only evaluates the information retained by the credit reporting agency.