FICO: It's the most common credit score in existence that's used by lenders. 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 consumer finance and technology company Credit Karma. "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, which contains more scores than you can count on your fingers and toes. Here's a breakdown of the myriad FICO credit scores 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 consumer education at CreditSesame.
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, senior principal scientist at FICO.
For example, 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.
A new version of the score, FICO 9, which is currently being tested by the credit bureaus, will treat medical debts less severely and bypass paid collections accounts entirely.
"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.
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 zero 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).
How many FICO credit scores
do you have?
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.