What Is a FICO Score? And Why Do You Have Different Credit Scores?

Your credit score is your credit score, and it’s the same no matter which lender pulls your credit report, right?

Nope.

You may have already noticed that the scores you get from free credit sites are different than the scores from paid monitoring sites like myFICO or scores provided on your credit card statements.

The difference here is that free sites use what are known as Vantage scores. While on other (paid) sites, you may be looking at a version of your FICO score, which is the score most often used by lenders.

FICO, created by the Fair Isaacs Corporation, is a credit scoring model that helps lenders determine how likely you are to repay borrowed money. Your FICO score is a three-digit number, ranging from 300 to 850, and is made up of a number of factors, including:

• Payment history (35%) — Paying credit accounts on time is one of the most important factors to a lender. Keeping your accounts in good standing can benefit your credit score. 
• Amounts owed (30%) — If you are using a lot of your available credit, it might look like you are overextended to a lender and therefore at high risk of defaulting on your payments.
• Length of credit history (15%) — This considers things like the ages of your oldest and newest credit accounts.
• Credit mix (10%) — Having a good mix of credit types like credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans is a good thing. These are all considered when calculating your FICO score. 
• New credit (10%) — This is the number of credit accounts you have opened recently plus any hard inquiries that have been made (a hard inquiry is when a lender pulls your credit report from the credit bureau). 

These are just ballpark percentages. Each person will have a slightly unique version of their FICO score based on their personal credit profile. For example, someone relatively new to using credit may have a score that is calculated differently than someone with a more extensive credit history. 

Also, the FICO scoring model is constantly being updated, which means there are different versions of your FICO score out there, and different lenders will rely on different versions. The most recent iteration is FICO Score 10 but it has not yet been widely adopted. Currently, the most common one being used by lenders to evaluate borrowers is FICO Score 8.

The FICO scores run as follows:

• 800 to 850: Exceptional
• 740 to 799: Very good
• 670 to 739: Good
• 580 to 669: Fair
• 300 to 579: Poor

The higher your score, the more likely you are to be approved for higher loan values, lower interest rates, and more premium credit cards.

But that’s not to say you need to be in the 800s! You can still qualify for many loans and rewarding credit cards with a score that’s very good or even just good.

And some lenders are starting to consider factors other than your FICO score, such as rent payment history and steady employment. That’s because the credit score process can be discriminatory against those who are new graduates, recent immigrants, or who haven’t been able to build a credit history for some other reason.

Vantage scores provide an alternate version of your FICO score. One that doesn’t require a large cost to be paid by the credit monitoring services. It’s a joint venture between the three credit bureaus: Equifax, Experian, and TransUnion.

While your Vantage score will provide a reasonably accurate picture of your FICO score, it is not the score that, say, mortgage lenders actually use. It’s sometimes referred to as an educational score, which is to say that, while they’re commonly available to consumers, they’re not used by lenders.

A common discrepancy between Vantage scores and FICO scores is in the scoring range. Vantage scores range from 501 to 990, while FICO scores range from 300 to 850. For this reason, the Vantage score you get from a credit monitoring service may be significantly higher than a FICO score pulled by a lender.

Of course, even your Vantage score or FICO score will be different depending on which credit bureau’s data was used.

When you apply for a mortgage, the lender is likely to rely on FICO scores 2, 4, and 5, which are contained within a larger product known as a residential mortgage credit report, or RMCR. This report typically includes credit information and credit scores issued from all three major credit bureaus.

Since the report contains information from all three bureaus, duplicate information is screened out of the report. For this reason, RMCRs are also referred to as “merged reports,” since they represent a filtered version of information from different sources.

There are at least three reasons mortgage lenders use the RMCR:

• Mortgage lenders use the middle of the three credit scores — Mortgage lenders typically look at the credit scores issued by all three credit bureaus, and select the middle score as the one they’ll base their loan decision on. So if your scores are 753, 727, and 698, the lender will use 727 as your score.
• Not all creditors report to all three credit bureaus — A creditor may report to just one or two bureaus, so the only way a mortgage lender can see your true and complete credit profile is by using a report that contains information from all three bureaus.
• RMCRs contain additional information — An RMCR usually contains information on both your employment and residence histories. A mortgage lender will use this information as additional verification. The report also includes legal records, such as bankruptcies, foreclosures, and judgments.

Another important aspect of RMCR credit scores is that they’re specifically tailored to mortgage lenders. That means the primary focus is on the likelihood of repaying a mortgage, rather than necessarily on credit cards, auto loans, and other loan types. Since a report you get from a third-party credit-monitoring service does not have a mortgage emphasis, the credit scores will be different from what an RMCR will provide.

Read more: How your credit scores affect mortgage rates

The credit requirements used for credit cards are less consistent than those used in mortgage underwriting. A credit card lender may use only one or two credit scores, usually FICO scores, but they don’t typically reveal which credit bureau they use. Some credit card lenders will use a specific version of a FICO score called a FICO Bankcard Score.

A credit card lender may also use some type of in-house credit scoring model, not to replace FICO scores, but as an additional form of validation of your credit score. The in-house scoring model may more closely approximate the credit experience that the credit card lender sees with its own portfolio of credit card customers.

And here’s an especially tricky bit: the standards credit card companies will use for approving new accounts could change frequently! That’s because lenders are consistently evaluating their portfolio of cards to manage risk. If, for example, more existing cardholders pay late one month, the lender may temporarily tighten approval requirements to avoid taking on new higher-risk accounts.

Still another factor to consider is that credit card lending standards are not as exact as those of mortgage lenders. Because all mortgage lenders place loans with the same major mortgage agencies (FNMA, FHLMC, and FHA), credit score levels are the same from one mortgage lender to another. That includes both approval and interest-rate calculations.

With credit card lenders, the standards are much more diverse. One credit card lender may require a minimum credit score of 700, while another requires only 650.

Credit card lenders may also use different underwriting criteria, both in evaluating your credit and your overall financial condition. For example, a credit card lender may put greater emphasis on credit utilization of existing credit lines, than on an applicant’s mortgage payment history. This is where the FICO Bankcard Score comes in, as it will provide a different score by weighing these factors differently for a credit card lender than it would for a mortgage lender.

Auto lenders use what is known as a FICO Auto Score, which is a customized scoring model for the car lending industry. It places less emphasis on payment histories with mortgages and credit cards, and pays closer attention to pay histories on car loans and other installment-type debt.

Even with the emphasis on auto loans, the difference from your regular FICO will usually amount to no more than 15-20 points in either direction. The FICO Auto Score will look at whether you have a current car loan, a paid car loan, and, of course, your payment history on those loans specifically.

One major disadvantage of the FICO Auto Score is that it’s a score you cannot obtain on your own, even from the credit bureaus directly. It’s a proprietary system used by auto lenders, and only available through them. Thus, you can’t know your score before purchasing a car, and that can put you at a disadvantage when arranging financing through a car dealer.

There’s a secondary disadvantage in getting your auto credit score, too. As I’ve found out recently from a couple of car-buying experiences, car dealers often refuse to pull your credit before you select a car that you want to buy. Unlike the mortgage loan process, if you shop at a dealer, there is no pre-qualification function helping you to determine how much car you can afford, what your score is, and what kind of rate to expect.

As it was explained to me, they don’t want to go through the time and expense of pulling your credit report until they know that you’re a serious buyer.

Being somewhat cynical by nature, my sense is that they want you to fall in love with a car, so that they’ll have you locked into buying through them, and only them, as well as their in-house financing deals.

But you can do an end-run around this tactic by applying for a car loan in advance through your bank or credit union or with an online auto loan lender. There’s usually no cost or obligation to doing this, and it’s strongly recommended since financing is a major revenue stream for car dealers, and your ignorance of your FICO score for auto financing could end up getting you less than the best deal, even if you ultimately get your loan from the dealer after all.

Many of the industry-specific scores are not available for public consumption. In other words, you cannot get a report based on your FICO Auto Score 8 or FICO Bankcard Score 5. When you apply for any of these loan products, all the evaluation goes on behind the scenes.

With industry-specific credit scores, you’ll only know whether you were approved or denied, along with the effective interest rate you’ll pay (for mortgage and auto loans.) If you are declined, you will get a letter in the mail stating the reason or reason(s) your application was denied. You will not, however, see the actual score that determined the decision.

The best thing to do is to follow good credit habits like paying your credit accounts on time, not using a lot of your available credit, and minimizing hard credit inquiries.

You can also sign up for services that monitor your general FICO score to give you an idea of where you stand with your score.

Never assume the credit score you’re looking at is the only one you have — you actually have several, depending on who pulls it and for what purpose.