Your FICO score is used by creditors to determine the overall credit risk of any individual consumer. This score is calculated by using a proprietary tool developed by the Fair Issac Corporation (NYSE:FIC). Each major credit bureau in the United States - Experian, Equifax (NYSE:EFX) and TransUnion - uses Fair Issac's technology to calculate a FICO score for any borrower. The more information the credit bureau has on you, the more accurate their calculation of the FICO score will be. This is why you may have a different FICO score from each of the three major credit bureaus.

FICO scores range from 300 to 850, where 850 is considered to be the best score achievable. According to FICO.com, FICO scores have been rising in recent years, and 22% of the U.S. population now has a FICO score greater than 800, while only 4% has a FICO score lower than 500. Percentages of Americans with other scores are: 7% for the 500-549 range; 8% for the 550-599 range; 10% for the 600-649 range; 13% for the 650-699 range; 16% for the 700-749 range, and 20% for the 750-799 range. (To learn more about how your FICO score is calculated, see How Is My Credit Score Calculated?)

If your FICO score is not as high as you would like it to be, there are things you can do to improve it. First of all, be sure to keep all of your bills current and in good standing. Always pay your bills when they come due, never make any payments late, and pay more than the minimum balance on your credit cards or pay them off completely if you can. The longer you have a good payment history, the higher your credit score will be.

The Advisor Insight

Equifax, Experian and TransUnion also have their own methods of calculating a credit score in house, although most lenders will use a borrower's FICO score.

VantageScore, developed in partnership by all three credit unions, is an example of an in-house method used. There are many versions of VantageScore. VantageScore 2.0 has a maximum score of 990. This makes it possible for someone to believe they have a FICO score greater than 850 when in reality, the score of 990 translates into a FICO score of 850.

There are many credit algorithms used which is one reason people get conflicting scores. The newest FICO algorithm is FICO 9 but not every credit bureau or bank uses it.

FICO scores will also vary depending on what purpose the borrower is borrowing, such as applying for a car loan versus a credit card.


Alexander Rupert
Sequoia Financial Group
Cleveland, OH