A FICO score is a specific type of credit score that is calculated using a 3 digit score, usually between 300 to 850. While credit scores and FICO scores are essentially the same things, different credit reporting companies may weigh the various different factors differently. Both are measuring the borrowers’ likelihood of repaying a loan based on their credit history.
The name FICO comes from the name of the analytics software company that developed this credit scoring method. It is short for Fair Isaac Corporation. While the company developed many different software and programs for consumers and businesses, it is best known for its credit scoring method. FICO Score 10 Suite was announced by the company in 2020.
FICO scores between 300 to 650 are considered bad, 650 to 700 are considered fair, 700 to 750 is “good”, and everything above is considered excellent. Borrowers with low FICO scores may either be denied by lenders or may be required to pay much higher interest rates.
A FICO score is calculated with the following factors: Payment history comprises 35% of the score, accounts owed or debt comprises 30% and length of credit history comprises 15%. Minor factors include new credit which comprises 10% and credit mix. The credit mix can include credit card debt and payments, vehicle loans, and mortgages.
While FICO scores are a common way to calculate credit scores, there are other methods. One of the alternatives is VantageScore which was introduced in 2006 and was jointly developed by three major credit bureaus.