The average FICO score is 716. That might differ from your credit score, where the average is 695.
This can make understanding your credit score, credit reports, and everything else associated with credit confusing. You can’t afford to get confused because so much of your life depends on your credit score.
What’s the difference between your FICO score vs. credit score? Read on to learn how they differ and what you can do to boost your credit score.
FICO Score vs. Credit Score
Your credit score is made up of three numbers that determine your creditworthiness. Lenders, employers, and landlords use your credit score to give you a job or rent an apartment to you.
The credit score is determined by credit scoring agencies. The two big credit scoring agencies are Fair Isaac Corporation (FICO) and Vantage Score.
Credit scoring agencies pull information from the same sources. They use credit reports from the big three credit reporting agencies: Equifax, TransUnion, and Experian.
Every time you apply for a credit card, make a payment, miss a loan payment, or take out a loan, the credit reporting agencies know about it.
Credit scoring agencies look at the same information and weigh certain aspects differently. That’s why you’ll see different credit scores.
FICO score and credit score are terms that get used interchangeably. Most lenders rely on your FICO score to review your creditworthiness.
FICO is the dominant brand in the space, the way that you refer to Kleenex when talking about tissues.
How to Improve Your FICO Score
Improving your credit score isn’t too difficult once you understand the elements that make up your credit score.
Both Vantage Score and FICO heavily weigh your credit utilization rate in your credit score. This can make up as much as 30% of your score.
The credit utilization rate is the amount of credit used against the amount of credit available. If you have $1,000 of credit and carry a $500 balance, your utilization rate is 50%.
Credit scoring agencies recommend that this is 30% or less. There are two ways to improve your utilization rate. The first is to pay down your credit cards.
The second is to get a credit limit increase. If you have a good history with your credit card company, you can get an increase. More credit available means you have a lower debt to credit ratio.
Look at your credit reports and fix any mistakes. Take out a loan like Credit Strong that improves your credit score as you make payments. Look here to find out more.
Make the Most of Your Credit Score
The more you understand your credit score, the easier it becomes to improve it. Comparing your FICO score vs. credit score isn’t complicated.
They’re usually the same thing because lenders use your FICO score to determine your eligibility for a loan. Your FICO score might differ from Vantage Score, but both are your credit score.
For more tips to improve your finances, be sure to check out the other articles on the blog.