How many FICO credit scores do you have?
FICO: It's the most common credit score used by lenders in existence. But did you know you have more than one? That's right; the world's most popular credit score comes in more flavors than Baskin-Robbins offers in ice cream.
There are older versions and newer ones; there are scores tailored for specific lending purposes, such as mortgages or credit cards; and there are scores custom-made for each of the three major credit reporting bureaus. Even though all these scores share the FICO brand, you likely won't score exactly the same on each one.
"It's probably the No. 1 or No. 2 misunderstanding about credit scores that there (isn't) more than one FICO score," says Kenneth Lin, CEO of credit education website CreditKarma.com. "A consumer literally has three to four dozen FICO credit scores."
But there's no reason to feel lost in FICO's complex credit-scoring universe that contains more scores than you can count on your fingers and toes. Here's a breakdown of the myriad FICO credit scores that lenders may use to judge your creditworthiness and what you can do about it.
Remember when Microsoft introduced Windows 95? Three years later, it followed up with Windows 98. In the years since, we've met Windows 2000, XP, Vista and versions 7 and 8. The main FICO score, known as a general risk credit score, is similar to Windows' evolution, says John Ulzheimer, president of credit education at SmartCredit.com.
The first FICO scores hit the scene in 1989. It (and its descendants) predicted the likelihood a consumer will become 90 days behind on payments over the next 24 months on different debt types. Over the years, the score has been poked, prodded and tweaked from its original formula to account for changes in consumer behavior and the lending landscape, says Frederic Huynh, principal scientist at FICO.
For example, the most current score, FICO 8, introduced in 2009, penalizes isolated late payments less than previous scores but punishes high balances on credit cards more. It ignores collection claims less than $100, and it reduces the benefit of authorized user accounts.
"In general, with every redevelopment, the newer score tends to be more predictive," Huynh says. "It pushes your good players up higher and your bad players down lower."
Still, many lenders stick to older versions of the FICO credit score because they predict well enough, and it's too expensive and time-consuming to change out scoring models, Ulzheimer says.
"It's like replacing a 99-cent gasket deep in your car engine and paying $5,000 in labor to do it," he says.
FICO produces several generations of its general risk score and its industry-specific credit scores, each one unique to each credit reporting bureau. See the tally of the different generations that each bureau has below.
Let's get specific
FICO wasn't content with just redeveloping the older scores to be better version of themselves. The company also rejiggered its classic model to hone in on certain types of lending. Out of the machinations came FICO credit scores that predicted mortgage risk, auto loan risk, installment loan risk, credit card risk and personal finance risk (for smaller lenders).
"The score starts off with the base score, which is robust and a good indicator, but takes it one step further to predict how likely a consumer will pay back its auto debt obligation, for example," Huynh says.
These FICO scores have different ranges than the generic risk score, which generally runs between 300 and 850. Otherwise, the three-digit score has a "very similar look and feel" to the classic, says Huynh. The scores still estimate the risk of delinquency over the next two years, but for a certain loan type.
These different flavors of the FICO credit score also have undergone redevelopments over the years, such as the general risk score. That means several generations of the industry-specific scores exist, too.
Multiplied by 3
So FICO has oodles of the general risk score and a boatload of industry-tailored credit scores. Now triple them. FICO tweaks each version of its credit score for each of the three national credit reporting bureaus -- Equifax, Experian and TransUnion -- which sell the scores to lenders and pay royalty fees to FICO.
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Most people think of a credit score as one very important number, when in fact, you have 53 different credit scores.
Your credit score is a powerful tool. When FICO first introduced the credit score in 1989, it was to help lenders determine the likelihood that you'd fall behind on payments in the next 24 months.
FICO used a number of criteria to determine that some criteria weighed more heavily on your score than others. Over the years, the folks at FICO changed the weight of those factors on your score to get more accurate results.
Many lenders aren't quick to change over to the latest version when FICO introduces a new way to calculate the score. The scores are also tweaked a little for each credit bureau and there are customized scores for the type of loan you're applying for, bringing the total to 53 different scores for each person.
"The three credit reporting agencies organize their information in different and fundamental ways," says Craig Watts, spokesman for FICO. "We tailor the formula, so it takes the maximum advantage of the bureau's strengths."
Experian and Equifax each provide 16 different FICO credit scores to lenders: five iterations of the general risk score and up to three generations of the five industry scores. TransUnion provides 21 different FICO credit scores to lenders, six versions of the general score and up to four generations of the industry scores.
Some older FICO scores are only available to lenders who have an existing relationship with the credit bureau. New clients (lenders) aren't offered the oldest scores.
So the final tally is 53 FICO credit scores. But that number shouldn't change your financial behavior, says Lin.
"As a consumer, you should focus on paying your bills on time, not getting in over your head and making sure there are no errors in your credit report," he says. "Don't get lost in all the nuances of the different scores."