Thursday, May 25, 2006

Credit Scores vs FICO scores - Are they the same thing?

Credit scores vs FICO scores - Are they the same thing?
by Nancy Woodward

No they aren't the same.

FICO scores were created by Fair Isaac Corporation. They are used by the mortgage industry to determine the creditworthiness of borrowers. The score is an indciation of how well a mortgage or loan will be repaid by the borrower. High FICO scores are best. Low scores indicate future non-payments. FICO scores primarly provide a guide to future risk.

Credit scores, on the other hand, are reported by three national credit bureaus - Equifax, Experian and TransUnion. The credit bureaus issue reports based on their credit ratings. They are used by many lenders and companies to check up on individuals but are not used primarily for mortgage lending. Credit reports show your current borrowings, accounts, status, how you pay your bills, and whether you have opened or closed accounts recently. The report provides data, does not make an judgement on your ability to pay. Credit scores show your historical credit information and how you paid your bills.

It is very important you verify the information contained in this report. Inaccurate information can harm you for a long time. Since this information is collected by the credit bureau and sold to merchants who request information on you, you need to check it yourself once in a while. In the event you find an error, put it in writing to the credit agency and the lender.

Nancy Woodward is an Accountant and Real Estate Professional. Visit her online


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