Most consumers don't have just one credit score. Credit bureaus and financial institutions use hundreds of credit scoring models, and each one could produce a different score for the same individual. This can lead to a number of questions about what these scores are and how they are determined. Among the better-known models are the FICO score and the Plus score. They're designed to do the same thing — show how risky it would be to lend someone money — but they're calculated differently.
Other People Are Reading
Origins of Each Score
The FICO score is based on algorithms developed by the Fair Isaac Corp.. a pioneer in the field of credit scoring. FICO licenses its scoring model to the three major consumer credit bureaus — Experian, Equifax and TransUnion. Each credit bureau produces a FICO score based on the data it has collected on consumers. Those FICO scores may differ from one bureau to the next, however, because each bureau collects consumer credit information independently.
The Plus score was developed by the Experian credit bureau. It's a proprietary model, available only from Experian.
Score Ranges and Uses
The FICO score ranges from 300 to 850, while the Plus score goes from 330 to 830. In both cases, the higher the score, the better. The scoring models don't decide what constitutes a "good" score — that's up to each individual lender. However, in general terms a FICO score or Plus score above 700 reflects good credit management.
Fair Isaac says that about 90 percent of lenders use FICO scores in making decisions on whether to extend credit. Be aware, though, that FICO produces dozens of scoring models, so the FICO score you buy from a credit bureau -- or even from the Fair Isaac consumer website myFICO.com -- might not be the
same one a lender is using to evaluate your credit applications.
Plus scores, meanwhile, are not used by lenders in making credit decisions. Experian says Plus scores are an educational tool — designed to give consumers a sense of their creditworthiness.
You're entitled to a free copy of your credit score once a year from each of the three major credit bureaus. Order these reports at AnnualCreditReport.com. Your report does not not include your score. You have to buy your score separately. However, several major credit card issuers give cardholders free access to FICO scores .
Both FICO scores and Plus scores are calculated based on the information in your credit report — and only that information. Demographic information such race, ethnicity, gender and education level aren't included. Nor is your income level, or your net worth. The FICO formula and the Plus formula look at the same information, but they arrange it a bit differently and give different weight to different things.
FICO Score Formula
Payment history refers to whether you have paid your bills on time and, if you've been late, how late and how often. Amounts owed includes your account balances, as well as your total amount of balances as a percentage of your available credit. Length of credit history looks at how long your accounts have been open. Types of credit in use factors in your "credit mix," such as credit cards, auto loans, mortgages and other debts. New credit includes accounts recently opened and applications for new credit.
Plus Score Formula
Credit usage covers most of the same ground as "amounts owed" in the FICO formula. Payment history is the same. Account ages is similar to "length of credit history." Account types is your credit mix. Inquiries are your credit applications.