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What you should know about credit scores

When you apply for credit whether for a credit card, a business loan, or a mortgage lenders want to know with certainty what risk they face when considering who to lend to. FICO scores are the premier credit scores most lenders use to determine any credit risk.

You have three FICO scores, one for each of the three credit bureaus:

Experian
TransUnion
Equifax

Each score is based on information the credit bureau tracks a profile about you. As this information changes, your credit score will change good or bad. Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time.

Taking steps to improve your FICO scores with all three credit bureaus is an absolute must so you and/or your business qualify for lending rates from commercial banks, as well as credit cards.

For your three FICO scores to be calculated, each of your three credit reports must contain at least one account which has been open for a minimum of six months. In addition, each report must contain a minimum of one account that has been updated in the previous six months. This ensures that there is adequate information and enough recent information in your report on which to base a FICO score with all three credit bureaus.

About FICO scores

Credit bureau scores are usually referred to as FICO scores because most credit bureau scores, used in the U.S., are produced from software developed by Fair Isaac and Company. FICO scores are then provided to lenders (credit card agencies, banks, credit unions, etc.) by these three major credit reporting agencies.

FICO scores also provide any lending institutions their most trusted yardstick as to possible future risk, based solely on your credit report data. The higher the score, the lower the risk. In short, your FICO score is a major factor in establishing trust, over many others.

While many lenders use FICO scores to help them make lending decisions, each lender has their own strategy, including the level of risk it finds acceptable for a given credit product. There is no single minimum score used by all lenders. But there are many additional factors that lenders use to determine your actual interest rates.

Other Names for FICO Scores

FICO scores have several names at each of the credit reporting agencies, so it is important that you know the nomenclature. All of these scores, however, were developed using the same methodology of Fair Isaac, and have been stringently tested to ensure that they provide the most accurate index of credit risk.

Credit Reporting Agency	FICO Score
Equifax	BEACON
Experian	Experian/Fair Isaac Risk Model
TransUnion	EMPIRICA

More than one score

In general, when people talk about "your score", they are referring specifically to your current FICO score. However, there is no one score used to make decisions about you or your business. This is true because:

Credit bureau scores are not the only scores used. Many lenders use their own scores, which often will include the FICO score as well as other information about you.

FICO scores are not the only credit bureau scores. There are other credit bureau scores, although FICO scores are by far the most commonly used. Other credit bureau scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores.
Your score may vary greatly at each of the main credit reporting agencies. The FICO score from each credit reporting agency considers only the data in your credit report at that agency. If your current scores from the credit reporting agencies are different, it's probably because the information those agencies have on you differs.
Your FICO score fluctuates over time. As your data changes at each of the individual credit reporting agencies, so will your score on your credit report. So your FICO score from a month ago is most likely not the same score a lender would get from the credit reporting agency today.