What's the Difference Between a FICO® Score and a Credit Score?

Whether you’re buying a home, applying for a car loan, or looking for just the right rewards credit card, your FICO® Score — or another type of credit score — is key to getting approved for credit. But just what do these terms mean? How can you find out your FICO® and other scores? Are there steps you can take to improve them?

Contrary to popular belief, your credit score isn’t too complicated. We’ll break down the financial terminology for you so you can make sure to stay on top of your credit score — and your finances.

What Is a Credit Score?

Though sometimes generically referred to as your “credit score,” your FICO® Score is actually one type of credit score. A credit score is a numerical value between 300 and 850 that is used to gauge how much financial risk you pose to a business. 

A credit score considered good — or better — generally starts around 670. A lower number means there’s more risk of the lender or other creditor not getting repaid. A higher number means that you’re likely to repay — which means businesses may be more likely to extend you credit or offer you their best rates.

Most credit scores fall between 600 and 750, with scores higher than that getting the best possible credit offerings.

Your credit score is not a lending decision: it’s just a number that businesses or financial institutions can use when they’re deciding whether or not to extend you credit. Credit unions, banks, credit card companies, and other institutions where you apply for credit want to get an idea of how likely you are to pay back your loan or credit card balance, or even to pay your rent on time.

Your credit score is not a magic number, either: it's a summary of your credit risk, based on the information found in your credit report. And it’s not the only factor that determines your access to credit. Lenders and other businesses — such as landlords and rental agencies — may also look at other factors, such as the amount of debt you can reasonably handle given your income, your employment history, and your overall credit history.

What Is a FICO® Score?

FICO® Scores in particular are used by 90% of top lenders, including PenFed. “FICO” is an acronym for the company that created it: the Fair Isaac Corporation. Though there are a number of different scoring systems that can be used to come up with a credit score, FICO® is the most common.

How Is My FICO® Score Determined?

How FICO® determines your score is based on a fairly simple formula:

• Payment history makes up 35% of your score
• Amount of credit utilized makes up 30% of your score
• Length of credit history makes up 15% of your score
• New credit applications make up 10% of your score
• Types of credit used makes up 10% of your score

Is My FICO® Score Always Calculated in the Same Way?

While this is the average way a FICO® score is calculated, it can vary depending on both the person in question, and the lender’s practices — which means a person with limited credit history may find the importance of each factor weighted differently. Additionally, the Fair Isaac system has several variations to it that may be used by different lenders. A more recent model that FICO developed in collaboration with Experian and Finicity is UltraFICO®, which monitors your regular banking activities and other indicators to potentially enhance your FICO Score. 

Additionally, some lenders may even alternate systems to determine your credit score and creditworthiness. VantageScore was launched in 2006 and professes to offer more equitable access to credit using data analytics.

How Can I Find Out My Credit Score?

Unlike your credit report, which you can get for free from each of the three credit reporting bureaus every year, finding out your credit score may have a fee attached. Some credit card issuers do offer free FICO® Scores, and websites such as NerdWallet offer a free credit score from VantageScore. Before you pay a fee, check with your financial institution or credit card company or a financial website to see if they offer free access to your score. 

The number you find can help you decide if you’re likely to qualify for a loan or give you a baseline as you attempt to clean up your credit — but you shouldn’t take your FICO® score as gospel. Remember how we said above that your FICO® score has variations (and that there are even competitive scoring systems)? The number you get, even if you pay for it, still might not be accurate depending on which credit bureau you’ve consulted — Experian, Equifax, or TransUnion.

While your credit information should be more or less the same from report to report, the information may vary slightly — say, if one business only reports a debt or payment to one of the three credit bureaus. Something like that could make your “perfect” score a little less perfect, so it’s better to focus on maintaining generally good finance habits than on obsessing over your exact score.

How Can I Improve My Credit Score?

But if your score is lower than average, we’ve got the goods on what you can do to improve it, from fixing any errors you might find on your credit report to taking steps to optimize your credit utilization.

The Takeaway

Whether your potential lender, credit card issuer, or landlord uses FICO® or another type of credit score, a solid rule of thumb is: if you pay your bills on time and don’t run up large debts, your credit score — and your borrowing options — should be in good shape.