How FICO Scores Work

Along with the credit report, lenders can also buy a FICO score based on the information in the report. That FICO score is calculated by a mathematical equation that evaluates many types of information from your credit report at that agency. By comparing this information to the patterns in hundreds of thousands of past credit reports, the FICO score identifies your level of future credit risk.

In order for a FICO score to be calculated on your credit report, the report must contain enough information-and enough recent information-on which to base a score. Generally, that means you must have at least one account that has been open for six months or longer, and at least one account that has been reported to the credit reporting agency within the last six months.


Credit scores are often called “FICO scores” because most credit scores used in the US and Canada are produced from software developed by Fair Isaac Corporation (FICO). FICO scores are providedto lenders by the three major credit reporting agencies:

Equifax, Experian andTransUnion.

FICO scores provide the best guide to future risk based solely on credit report data. The higher the score, the lower the risk. But no score says whether a specific individual will be a “good” or “bad” customer. And while many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single “cutoff score” used by all lenders.


In general, when people talk about “your score;’ they’re talking about your current FICO score. But in fact there are three different FICO scores developed by Fair Isaac-one at each of the three main US credit reporting agencies. And these scores have different names.

The FICO scores from all three credit reporting agencies are widely used by lenders. The FICO score from each credit reporting agency considers only the data in your credit report at that agency. Fair Isaac develops all three FICO scores using the same methods and rigorous testing. These FICO scores provide the most accurate picture of credit risk possible using credit report data.


FICO scores range from 300 to 850. Fair Isaac makes the scores as consistent as possible between the three credit reporting agencies. If your information was exactly identical at all three credit reporting agencies, your scores might still differ because the models for the three credit reporting agencies are developed separately. However, all three scores would be within a few points of each other.

Some people will find that their scores at the different bureaus will vary by more than a few points. The differences in scores can be caused by a couple of different factors:
1.The way lenders and other businesses report information to the credit reporting agencies sometimes results in different information being in your credit report at the three agencies.

2.The agencies may also record the same information in different ways. Even small differences in the information at the three credit reporting agencies can affect your scores.

Since lenders may review your score and credit report from any of the three credit reporting agencies, it’s a good idea to check your credit report from all three and make sure they’re all accurate.

Frequently Asked Questions

Are FICO scores unfair to minorities?

No. FICO scores do not consider your gender, race, nationality or marital status. In fact, the Equal Credit Opportunity Act prohibits lenders from considering this type of information when issuing credit.

Independent research has shown that credit scoring is not unfair to minor”lties or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.

Are FICO scores the only credit risk scores?

No. While FICO scores are the most commonly used credit r”lsk scores in the US, lenders may use other scores to evaluate your credit risk. These include:
• Application risk scores. Many lenders use scoring systems that include the FICO score but also consider information from your credit application.

• Customer risk scores. A lender may use these scores to make credit decisions on its current customers. Also called “behavior scores,” these scores generally considerthe FICO score along with information on how you have paid that lender inthe past.

• Other credit scores. These scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores. When purchasing a credit score for yourself. make sure to get the FICO score, as this is the score most lenders use when making credit decisions.