Getting to the Right Credit Score: FICO Credit Score

When applying for the establishment of a new revolving credit line, personal loan, home improvement, insurance policy, mortgage loan and even in some cases employment, Lenders as well as employers reference one or more of the major credit bureaus: Equifax, Experian, and TransUnion. These Lenders and Employers rely on the credit bureaus to make an informative decision of your worthiness in extending credit and/or employment consideration.

The fact is that, there is different credit scoring methods that your perspective creditor/employer may be taking into account in accordance to their own in house policies. But, there is only one standardized methodical formula that has been widely accepted and nationally adopted, that is the FICO credit score.

Each bureau has developed their own customized criteria in rating your worthiness in addition to the standardized FICO credit score.

The three major credit bureaus each have their own version of the FICO credit score: Equifax uses the Beacon system, TransUnion uses the Empirica system, and Experian uses the Experian/Fair Isaac system. This is the reason why your credit score, when calculated by the individual bureau, can differ substantially from one credit score method from another credit score method.

Adding to the consumers confusion, the lack of a unitized standardization, is at the fault of the credit bureaus themselves. Just recently, Experian revealed that the national average credit score of its consumers is 678. This is very misleading to the average consumer. When you obtain your credit report and score directly from Experian, you are getting what they call the "PLUS Score," which is NOT the standardized FICO credit score. Equifax is the one exception, you may obtain your FICO credit score directly from Equifax for a small fee. The 678 PLUS Score reported by Experian is actually the average of consumers' PLUS Scores, not their FICO credit scores.

More than 75% percent of lenders use the FICO credit score exclusively.

The FICO credit scoring is a numeric method of scoring your credit worthiness developed by Fair Isaac and Company and standardized by the Fair Credit Reporting Act.

From information entered in a database FICO defines your personal credit score as a numeric value between 300 and 850 that, in turn, provides insight to the perspective creditor on how likely you are to repay your obligations in a timely manner as originally agreed upon with previous creditors.

How is Your FICO Credit Score Calculated?

Your FICO credit score is calculated by the Fair Isaac Corporation. Fair Isaac calculates the data information taken from within your credit report, and analysis that data using a proprietary formula. Your FICO credit score weights certain aspects of the data as:

• 35% Payment History
• 30% Amounts Owed
• 15% Length of Credit
• 10% New Credit
• 10% Type of Credit

You must also note that your FICO credit score is only as accurate as the information provided to them by the credit bureaus. If the credit bureau was furnished inaccurate information contained within a database by a creditor, it will then stand to reason that it will affect your FICO credit score.

With all things considered, your best practice is to “Know Before, You Leap”. Compare your credit report from all three major credit bureaus: Equifax, Experian and TransUnion. Then order your unbiased FICO Credit Score from MyFico.