FICO vs Experian: What are the Differences?
FICO vs Experian? Transunion vs. FICO? There is a lot of confusion around credit scores and credit reports. Here's what you need to know to keep your credit healthy so you can save money down the road.
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FICO vs Experian: What are the Differences?

FICO vs Experian? Transunion vs. FICO? There is a lot of confusion around credit scores and credit reports.

You can’t actually compare FICO to Experian. Or Transunion to FICO. The reason is because your FICO score is a 3 digit score and Experian is a credit bureau displaying your credit report.

Let’s talk about what a credit score is and what a credit report is. You should care about BOTH.

 

What is a Credit Report?

Your credit report contains information on your history of debt and payments. It is a record of your borrowing and repayment history. In the US, there are three national credit bureaus. These three bureaus are Experian, Transunion, and Equifax. Each bureau collects information a little differently but they are very similar.

You can request your credit report for free via annualcreditreport.com. This is the only legitimate website to request your credit reports for free so do not use any other site. This is a government-sanctioned site and can be trusted.

 

What Does Your Credit Report Include?

Your credit report is updated when lenders report your credit usage and borrowing activities. Some lenders do not report to all bureaus so that is something to keep in mind. You can ask your lenders which credit bureaus they report to.

 

Credit reports include:

  • Your total outstanding debt
  • Your history of paying off debt
  • Your history of debt payments (on time, late, missed)
  • Bankruptcies filed

 

Why Does Your Credit Report Matter?

Although your credit score is what lenders use to determine if they will loan you money and what the interest rate will be, the information comes from your credit report.

You should be checking your credit report from each of the three bureaus at least once a year to make sure the information is accurate and there are no errors. By checking regularly, you will be able to see if you are a victim of identity theft or if they are any mistakes. If you see any mistakes or suspicious activity, you need to report it right away. This is why it is so important to check your credit reports.

Due to the COVID-19 pandemic, you can access your credit reports weekly through 2022.

The more you know: The difference between a hard and soft check on your credit report matters, this article explains it.

 

What is a Credit Score?

Your credit score is a three-digit number. It is derived from data in your credit reports. There are many different scoring models that analyze your credit report information. The two most widely used credit scoring systems are FICO  Score and VantageScore. Whenever you check your credit score, see what scoring system is being used. If you are trying to get a mortgage or a loan, keep in mind that lenders can use their own scoring model.

 

What Are The Differences Between FICO Score and VantageScore?

Although the two scoring models are similar, there are some differences that you need to be aware of. This is why you can get different scores depending on where you check your credit score.

Both the FICO Score and VantageScore use a credit range of 300 to 850.

 

1. Length of Credit History Required

In order to have a FICO score, you need to have one or more accounts that have been open for at least six months and at least one account that has reported to the credit bureaus within the past six months.

In order to have a VantageScore, you need one month of credit history and one account reported within the previous 24 months. 

This is important to know because if you are new to credit, you might not have a FICO credit score but you could have a VantageScore credit score. You will want to track both but keep in mind that they could be different and you might want to monitor VantageScore more closely.

 

2. Main Categories

FICO groups the information from your credit report into five categories. Each category represents a percentage of your score.

  • Payment History (35%)
  • Amount Owed (30%)
  • Length of Credit History (15%)
  • Types of Credit/Credit Mix (10%)
  • Credit Inquiries/New Credit (10%)

 

VantageScore groups credit information into six main categories but does not include specific percentages

  • Payment History (extremely influential)
  • Age & Type of Credit (highly influential)
  • Percentage of Credit Limit Used (highly influential)
  • Total Balances & Debt (moderately influential)
  • Recent Credit Behavior/Inquiries (less influential)
  • Available Credit (less influential)

 

For both models, payment history is the most important. You need to make sure you are making minimum payments on time.

 

What Main Factors Affect Your Credit Score?

Payment History

This is whether you have paid your bills on time. Although you should be making extra payments if possible when paying off debt, they are just tracking your minimum payments. Paying bills late by 30 days or more can decrease your score. The later you pay, the greater the damage.

 

Credit Utilization

This is the ratio between the total balance you owe and your total credit limit on all of your revolving accounts (credit cards and lines of credit). If you use more than 30% of your available credit, it appears negative to creditors. Maxing out your credit cards can hurt your credit score because it increases your utilization rate.

 

Age of Credit History

This includes the age of your oldest account open and the average age of your combined accounts. You can calculate the average by adding up the age of each of your accounts and different it by the number of accounts you have

 

Credit Mix/Type

The two main types of credit accounts that go into the mix are revolving credit and installment debt. Installment debt includes loans such as car loans or mortgage loans.

 

Recent Credit/Recent Inquiries

Soft inquiries do not show up on your credit report. Hard inquiries do show up on your credit report and can lower your credit score. Although this isn’t a main factor, you should not be opening many credit cards or taking out multiple loans at a time.

 

Why Does Your Credit Score Matter?

Your credit score isn’t just important if you want to get approved for a loan. An excellent credit score can actually save you a lot of money.

Insurers can use your credit score to set premiums for auto or homeowners coverage. Some landlords check your credit score to determine who they will rent to. Utilities companies check credit scores to decide if you need to put a deposit down.

Of course, if you are trying to get a loan, an excellent credit score will save you a ton of money on interest. You can actually save tens of thousands of dollars in interest.

 

What Are Tips For Increasing Your Credit Score?

You can build and repair your credit without paying a company. You can also have an excellent credit score without debt (I have no debt and my credit score is near perfect).

 

Here are some quick tips for how to increase your credit score.

  1. Pay your bills on time every single month. This is crucial.
  2. Reduce your credit utilization. You want it to be under 30% and ideally under 10%. One way to do this is by asking for a credit limit increase
  3. Dispute any credit report errors. Periodically monitor your credit reports to make sure no inaccurate information appears. If you find something that’s out of place, initiate a dispute as soon as possible.
  4. Don’t close old accounts unless it is 100% necessary. This will affect your age of credit history and lower your credit score.