One of the most misunderstood facts about FICO scores is that most consumers think they only have 3…one for each bureau. The fact is that a consumer actually has dozens of FICO scores. With the rollout of FICO 09 a consumer now has approximately 65 different FICO scores. That can sound a bit overwhelming but let’s break that down a bit.
There are basically six types of FICO scores: General, Auto, Mortgage, Credit Card, Installment loan and Personal finance. Each basic scoring model contains different variations. All of which look at and prioritize differently the information contained in a consumer’s credit report. For example an auto FICO score is going to place more importance on the history of any previous auto loans a consumer has had. A Credit card FICO score will look more at your utilization of credit card balances and payment history. Some even look at whether you make more than your minimum payments every month.
All of these scores can be drastically different. The highest scores a person usually has are their personal scores which falls under the General score category. One of the most frequent questions we get is based on this scenario: a borrower will go to a loan officer after having pulled their own credit and walk in with a 740 FICO score. The lender then pulls their credit using mortgage codes to get a mortgage FICO score and that score is 680. Why? A personal score can sometimes be as much as 100 points higher then a mortgage score. Although that’s usually the top end. More often than not the personal score will be 30-50 points higher than a mortgage score or any other scoring model for that matter.
This is because the models are based on different criteria. While it is always a good practice for consumers to order copies of their credit reports every year, it is really not necessary to order the scores that go along with them. They are personal scores and aren’t used by any industry for any reason. They are more of a “warm and fuzzy” to make us feel good about our scores than anything else.
The scores will also vary per bureau. So even though a mortgage FICO score may have the same parameters for each bureau, the weight each of those parameters carries may vary per bureau. According to a senior consumer credit specialist at FICO, “Each of the bureaus captures and report data slightly differently and the score optimizes those differences.”
The bottom line is that a consumer should not get caught up in all the various FICO scores and their nuances. A consumer should focus on the important things that surround all FICO scores: paying their bills on time, not running up a lot of revolving debt (preferable keeping all revolving balances below 20% of the high credit), not closing accounts and only opening new accounts when absolutely necessary.
These actions will ensure a good FICO score no what model it is being pulled from.