If you want to apply for a mortgage, take out a new credit card, or apply for an auto loan, any reputable lender will probably look up your FICO® Score before giving you a loan. FICO® Scores are important indicators of your credit health and will largely determine mortgage terms and lending rates.
However, because there are different scoring models, it’s essential to know which one your lender will use. In most cases, the FICO® Score they use depends on the loan type you are applying for.
If you want a better understanding of FICO® Scores, why they matter, and which credit scoring models get used for different types of loans, you’ve come to the right place.
What Are FICO® Scores?
A FICO® Score is essentially the same thing as a credit score, the difference being that FICO® refers to the scoring model that a lender uses when checking your credit score. FICO® stands for Fair Isaac Corporation, which is the company that invented it to determine your credit score and creditworthiness.
FICO® Scores are important because they affect lending decisions, such as whether lenders will give you a loan or credit card. Your FICO® Score will also help determine your mortgage rate, credit rate, credit utilization, interest rates, and other important details about loans and credit cards.
While major credit bureaus can use different scoring models to determine your FICO® Score, here are their five general parameters.
- Payment History
- Amounts Owed
- New Credit
- Credit Mix
- Length of Credit History
Why Are There Variations of FICO® Scores?
Something you’ll quickly notice about FICO® Scores is that there are different variations of it. Different variations are necessary because various lenders, including credit card issuers and mortgage lenders, don’t use the same scoring models when determining your creditworthiness.
For example, the scoring model a lender will use is different for mortgage applications than for auto loans. Here are some of the different FICO® Score models your lenders might use:
- FICO® Score 8
- FICO® Auto Score 2
- FICO® Auto Score 8
- FICO® Score 2
- FICO® Bankcard Score 2
- FICO® Score 3
- FICO® Bankcard Score 8
Each of these scoring models is designed for specific lending purposes. Regardless of which credit scoring model gets used, scores range from 300 to 850, except for the auto score model, which ranges from 250 to 900.
Which FICO® Score Do Lenders Use?
Lenders use different FICO® Scores based on the type of credit or loan you request. It’s entirely up to each individual lender as to which scoring model they prefer to use. They can determine this based on their business preferences and requirements as well as the type of loan you are applying for.
Having said that, however, the FICO® 8 is the most popular credit scoring model on the market and has been for some time. While lenders and industries can use the FICO® Score 8, it’s most used by credit card issuers.
Why Are There Industry Variations?
In addition to different types of FICO® Scores, there are also different variations of each score. While this certainly makes things more confusing, depending on which industry is assessing your credit score, it’s necessary.
You see, lenders in different industries need to create risk assessment models specific to their industry. This is why lenders in the mortgage or auto industry might use the same base FICO® Score, but they add their own unique twist to it. This allows them to make an accurate risk assessment according to their preferences.
Popular FICO® Score For Credit Cards
The FICO® Score 8 is the most popular scoring model used in the credit card industry. Recently, however, because it is a general scoring model, a variation of it was created that caters specifically to credit cards. This version, known as the FICO® Bankcard Score 8, is quickly becoming the preferred way for credit card companies to assess your creditworthiness.
Popular FICO® Score For Mortgage Lenders
While the FICO® Score 8 is the most popular score in the credit card industry, this is not so for mortgages. Each of the three major credit bureaus in the mortgage industry has its own credit scores to determine how creditworthy you are.
Popular FICO® Score For Auto Loans
In addition to the credit card industry, the FICO® Score 8 is the most common score used for auto loans. However, each of the three credit bureaus can use a different version of the FICO® Score 8 to determine your credit score or uses a different scoring model altogether.
How to Monitor FICO® Scores
It’s important to stay on track when it comes to checking your credit. That way, if you have a poor score, you can improve it so that you receive better terms and rates on loans. You can monitor your FICO® Scores by utilizing MyScoreIQ credit monitoring services. MyScoreIQ offers industry scores, including the following:
- FICO® Score 8
- FICO® Auto Score 2
- FICO® Auto Score 8
- FICO® Score 2
- FICO® Bankcard Score 2
- FICO® Score 3
- FICO® Bankcard Score 8
The Bottom Line
In a nutshell, when you want to borrow money for things like a home, credit card, or car, lenders can check your FICO® Score to decide if they’ll lend to you and at what terms. Your FICO® Score is influenced by your payment history, debts, new credit, types of credit, and how long you’ve had credit.
It’s important to understand that lenders use different FICO® Score versions for different types of loans. For credit cards, they often use the FICO® 8 model. Mortgages have their own as well as auto loan lenders.
To keep tabs on your credit health and potentially get better loan deals in the future, it’s smart to check your FICO® Scores regularly. Luckily, MyScoreIQ credit report monitoring services can help you do that easily and accurately. Get started with MyScoreIQ today and check your FICO® Scores.
