FICO is perhaps the most recognizable name in credit scores. The Fair Isaac Corporation, which developed the FICO credit scoring algorithm, says its scores are used by 90% of top U.S. lenders in more than 90% of lending decisions. Currently there are several types of FICO scores available. The most widely used model may be FICO 8, though it's since been joined by FICO 9, FICO 10, and FICO 10T. There are also older versions of the score that are still used in specific lending scenarios, such as for mortgages or car loans. 

Key Takeaways

  • FICO scores are the most widely used credit scores in the U.S. for consumer lending decisions. 
  • There are multiple FICO credit scoring models, each of which uses a slightly different algorithm.
  • FICO scores are based on the information collected on individual consumers by the three major credit bureaus, including their payment history, credit utilization, and the age of their accounts. 

How FICO Scores Work

FICO scores have been around for more than three decades. The company uses information found in individual consumers' credit reports to calculate credit scores for them. These scores are then used by lenders to gauge the consumer's creditworthiness and determine whether to approve applications for loans, credit cards, and other borrowing. 

FICO scores range from 300 to 850, with 850 considered a perfect score. The higher your score, the better your odds of being approved for loans and lines of credit at the most favorable interest rates.

FICO scores are based on these five factors:

  • Payment history (35% of your score)
  • Credit utilization (30% of your score)
  • Credit age (15% of your score)
  • Credit inquiries (10% of your score)
  • Credit mix (10% of your score)

Individuals can have more than one FICO score. The multiple FICO score versions in use today include:

  • FICO 2
  • FICO 3
  • FICO 4
  • FICO 5
  • FICO 8
  • FICO 9
  • FICO 10 and 10T

Each scoring model may be used in different lending situations. For example, FICO scores 2, 4, and 5 are used by both mortgage and auto lenders to determine borrowers' creditworthiness. 

Currently, the most common FICO score is FICO 8. This version can also be used fn auto lending, as well as for personal loan and credit card decisions.

Each of the three major credit bureaus—Equifax, Experian, and TransUnion—generates consumer credit reports, which are then used to calculate FICO credit scores. You might have different FICO scores for each bureau, based on the information that's being reported to them by your creditors. 

Regardless of which FICO credit scoring model is involved, the same rules apply for maintaining a good score. Those include paying bills on time, maintaining a low credit utilization ratio, and applying for new credit sparingly. 

What Is FICO 8?

FICO 8 is probably the most widely used FICO credit score today. So if you apply for a credit card or personal loan, odds are that the lender will check your FICO 8 scores from one or more of the major credit bureaus. 

FICO 8 is unique in its treatment of factors like credit utilization, late payments, and small-balance collection accounts. Here are some key things to note about FICO 8:

  • This scoring model is more sensitive to higher credit utilization (meaning the amount of your available credit that you're using at any given time). 
  • Isolated late payments on your credit report may not count against you as much as having multiple late payments. 
  • Small-balance collection accounts in which the original balance was less than $100 are ignored for credit scoring purposes.

It's also worth pointing out that there are different versions of FICO 8. With FICO Bankcard Score 8, which is used when you apply for a credit card, the focus is on how you've handled credit cards in the past. FICO Auto Score 8, on the other hand, doesn't emphasize credit card activity and history as heavily.

What Is FICO 9?

FICO 9 was introduced in 2016 and is available to both lenders and consumers. While not as widely used as FICO 8, this scoring model has some features that could help certain consumers improve their credit scores. 

Here are the most noteworthy aspects of FICO 9:

  • Third-party collection accounts that have been paid in full no longer have a negative impact for credit scoring. 
  • Unpaid medical collection accounts have less of a negative impact compared to other types of unpaid collection accounts. 
  • Rental history can now be factored into FICO 9 credit scores, which may help people with limited credit history.

FICO 9 credit scores are available to consumers for free through lenders that participate in the FICO Score Open Access program. For example, your credit card company may offer free FICO 9 credit scores as one of its customer benefits. Otherwise, you'll need to purchase your scores from FICO. 

Rent payments aren't factored into FICO 9 scores automatically. Your landlord has to report your payment history to one or all three of the major credit bureaus for them to be included. 

What Is FICO 10 and FICO 10T?

FICO 10 and FICO 10T are new credit scoring models introduced in 2020. Fair Isaac Corporation says the FICO Credit Score 10 Suite is designed to be its most predictive scoring model yet, giving lenders a more precise picture of someone's credit risk. 

FICO 10 and FICO 10T still follow the same basic FICO algorithm that focuses on payment history, credit utilization, credit age, credit mix, and credit inquiries. What makes FICO 10T different is the use of trended data.

Trended data looks at a person's credit patterns for the previous 24+ months. So, for example, it takes into account things like whether you carry a balance on your credit cards from month to month, or always pay in full, and whether you've consolidated debts at any point during that time period. 

According to the company, FICO 10 and FICO 10T should eventually overtake FICO 8 as the most popular scoring models.

FICO Credit Scores vs. Other Credit Scores

While FICO dominates the credit scoring business, it's not the only product out there. The three major credit bureaus launched a competitor, VantageScore, in 2006. Its scores also range from 300 to 850 and are calculated using information from your credit reports. The difference is VantageScore weights the various factors differently.

For instance, credit usage, account balances, and available credit are extremely influential in calculating VantageScores. Credit mix and experience are highly influential, while payment history is only moderately influential. Credit age and inquiries for new credit carry the least weight for VantageScore calculations.

As with FICO scores, there are several different VantageScores, the most recent being VantageScore 4.0. Some credit card issuers and other companies that offer free credit scores to their customers provide VantageScores rather than FICO scores.