Difference Between Credit Report and FICO

Edited by Diffzy | Updated on: September 15, 2022

       

Difference Between Credit Report and FICO Difference Between Credit Report and FICO

Why read @ Diffzy

Our articles are well-researched

We make unbiased comparisons

Our content is free to access

We are a one-stop platform for finding differences and comparisons

We compare similar terms in both tabular forms as well as in points


Introduction

Credit reports and credit scores are important, especially when assessing the granting of a credit loan request. These functions are based on the history of credit loans taken previously, their payments, current account balances, payment obligations, and bankruptcies if any. These data reports make it convenient and quick to select suitable candidates to lend money to and avoid unreliable borrowers.

A better score also makes it easier for a person to have their loan request sanctioned on the first attempt itself. These scores are a credible source of information that also includes personal details, address, and other security deposit details. These also provide reliable and accurate details about the past and current status of the borrower. Therefore, it provides a fair and unbiased opportunity to all who need credit money. The needs may vary from person to person. The cause may be taking a mortgage, auto loan, or housing loan.

Credit Report Vs. FICO

Your credit report contains a comprehensive summary of all transactions that occurred in and out of your credit bank account. This denotes your timely payments, previous debts, and other criteria that can be used to assess a borrower's capability to repay the money lent back.

The FICO score is a point system that offers score points based on the credit report assessed prior. A FICO score is one type of credit score used. However, multiple options could be used to check this score. An example of a score similar to the FICO score is the Vantage score.

This score is obtained using specific formulas. However, the criteria considered while calculating this score may vary from one to another based on which institution generates the score.

These reports and scores have varied uses. However, a Credit score or FICO score is the preferred scoring system to assess an eligible borrower. An eligible borrower is defined as one who has a good FICO score along with no prior history of bankruptcies or other remaining payment obligations to any credit loan company. An eligible borrower is also assessed his capability to repay the loan money.

These scoring systems avoid unnecessary delay wasted in checking the prior histories, payments, and personal details verification. These system-generated reports and scores make it easy for both the lenders and borrowers to apply for a new credit loan. Also, ensuring the only credible and reliable source of data about the money transaction histories, personal details, and other inquiries required while processing a request for loan approval.

Difference Between Credit Report and FICO in Tabular Form

Table: Credit Report Vs. FICO
Main parameters of comparison
Credit Report
FICO
Scoring model
There is no scoring system in a Credit report. Instead it includes a set of action summary made in and out of the bank account (previous or current).
The score ranges between three hundred and eighty-five (300-850).
Opted industry
Not preferred by the majority of lenders as a criteria to assess a borrower. Instead, it is used as an educational score.
Used by most lenders in the industry to assess the eligibility of a borrower to take a new credit loan.
Characteristics
A credit report is a summary of all events and actions that have taken place in your account.
Whereas, a FICO score is a credit score that uses credit report data to generate a score based on whether the approval is granted or not.
Points
Differs highly from FICO score values.
Technique for scoring that is simple and convenient.
Duration required to create score
At least a minimum duration of six months is required to generate this score.
The duration of the generation of the score also depends on the company issuing it. The time range could be any time after one month.
Calculation principle
 The principle varies from one company to the next depending on which company issues the score.
This score involves certain key components that affect this score.
These are as follows:
  1. Payment history
  2. Owed Amount
  3. Credit mix and credit age
  4. Any recent credit applications
All these parameters contribute only a certain percentage to the score.

What is a Credit Report?

A credit report is a record of how you handled credit in the past and is generally a summary of these actions. It includes data from multiple sources, including credit card companies, banks, and other agencies offering credit.

Some facts about a credit report are given below:

This history of money lent, payments made, and the timeline of payment can be used as an assessment to decide whether to provide you with credit or not and the terms and conditions that must be applied if lent.

These reports are usually assessed by potential lenders. However, these reports may also be asked to be submitted before you apply for insurance, housing, tenant contracts, or other services.

Other personal information may be included in a credit report.

  1. Identity details
  2. Credit account details
  3. Inquiries made by other companies
  4. Accounts for collection and bankruptcy

Usually, these reports are prepared by the three common bureaus. Your personal details' section includes information such as first and last names, security numbers, addresses, and sometimes your current and former employers. Account information may include payment history, credit balances, and the dates when these loans were opened and closed. It also includes the inquiries list, which provides information to other potential companies and lenders who have made requests to view a particular person’s credit score. Checking these scores personally can also give you a clear idea before you apply for a housing or auto loan. The procedures could be easier and more convenient if you have a good credit report and scores.

What is a FICO Score?

The FICO score is a kind of credit score that was developed in the early 1980s and was the first credit score to be developed. The name FICO is derived from the brand "Fair Isaac Corporation". This data is retained based on the credit report. Hence, the terms "credit score" and "FICO score" are often used interchangeably. The usual FICO score ranges between a minimum of three hundred and a maximum of eight hundred fifty (300-850). However, industry-specific scores can range from 250 to 900.

A higher score usually indicates better credit. A good credit score is defined as a score between 619 and 700. It is the most popular credit report score model used. It is classified into two major types: These include base scores and specific industry scores. The latter one is structured especially for taking mortgages, auto loans, and other credit loans.

How can a FICO score be calculated?

The company uses a specific formula that uses the credit report data to generate a score. However, your score may vary depending on which bureau's data was used. The three major companies that produce this score are Equifax, Trans-union, and Experian. Accessing the FICO score is usually easy with a monthly credit card statement.

You can also pay to get a FICO score via the company’s website or try other credit scores like vantage scores that work exactly like a FICO score. Often, there is tight competition between the uses of these two types of credit scores. Even if the FICO term is used interchangeably, it is not the same as a credit score, as the FICO score is only one type of a variety of credit scores. These credit scores could also be used by landlords to decide whether to give you an apartment for rent or provide you with one as a tenant.

Five factors can affect your credit score.

  • Payment history determines 35% of your total score.

Late payments can severely lower your score, as can a history of bankruptcy.

  • The amount of debt relative to credit limits accounts for 30% of your total score.

This denotes the current credit you are using. The less credit is used currently, the better the score.

  • Timeliness of credit loans accounts for about 15% of the total score.

It indicates the details of the year in which you have opened and closed different credit accounts.

  1. Recent applications, if any, can cause a decrease of up to 10% of the total score.
  2. Another 10% of the score is deducted if you have more than one credit loan at a time.

 The Main Difference Between Credit Report and FICO in Points

  • Characteristics

A credit report is a summary of how a borrower uses his previous and current credit accounts. It involves all the details regarding the transactions, payments made, and other account histories. It is similar to a bank statement that is generated monthly by most banks these days, even without requesting it.

  • Scoring model

There is no score on a credit report. Instead, the data from a credit report is used to generate the FICO score, or "credit score." The scoring model is based on a definite formula that assesses multiple factors affecting the score.

  • Opted by

The former may be used for limited applications. However, most lenders, private or industrial, use the credit score to assess a borrower and not the credit report. However, a credit score is generated by using the data from a credit report generated.

  • The formula for Calculating Scores

There is no formula involved in generating a credit report. Whereas, a FICO score has a definite formula used for its calculation. This includes various criteria assessed, including personal identity details, security number, assets, previous and current loan history, capability to repay, and others.

  • Uses

Credit reports have fewer or only limited applications. However, FICO or other credit scores play an essential role in deciding whether approval for a new loan is based on its score point system. A good score is defined as having points between 650 and 719. The better the score, the better the possibility of having a guaranteed loan at the first attempt itself. It offers a convenient way to decide whether a person is eligible or not for a loan to be approved. Better credit scores also provide the opportunity to obtain loans at reasonable and lower interest rates. The terms and conditions, timeline, and credit loan limits may depend based on the score generated.

  • Duration of generated report or score.

Credit report usually occurs on a monthly basis just like a monthly bank statement. Credit score on the other hand may take duration from minimum of six months to maximum of several more months.

Conclusion

The FICO score is one of the credit scores most popular among lenders. However, there is the possibility to access credit scores using others' like a Vantage score. Different credit bureaus have different criteria for approval and score ranges may vary slightly. Hence, the score ranges vary from one to another bureau and are dependent on the institution generating the score. After you apply for a loan, the lender will assess your credit score based on which he will assess your risks, your annual income, and your capability to repay it. The reports are instant and accurate; hence, they are reliable criteria for deciding on suitable candidates and reducing risks associated with borrowing money from unreliable borrowers.

Timely payment and keeping a low balance account value form the largest section of your score (about two-thirds). A FICO score is a credit score that uses credit report data to generate a score based on which the approval is granted or not. The score range depends on the issuing company. The score ranges between three hundred and eighty-five (300-850).

Borrowers with good credit scores are rewarded with access to loans and favorable low-interest rates. Borrowers with bad credit scores are often unable to get loans or receive loans with high-interest rates. For these reasons, it's important to ensure the information in credit reports and credit scores is accurate and reliable. Because it makes it easy and convenient for the lender and borrower, the decision criteria on loan approval and instant money processing are faster. 

References

  • https://www.equifax.com/personal/education/credit/report/what-is-a-credit-report-and-what-does-it-include/
  • https://en.wikipedia.org/wiki/Credit_history

Category


Cite this article

Use the citation below to add this article to your bibliography:


Styles:

×

MLA Style Citation


"Difference Between Credit Report and FICO." Diffzy.com, 2022. Sun. 27 Nov. 2022. <https://www.diffzy.com/article/difference-between-credit-report-and-fico-155>.



Edited by
Diffzy


Share this article