Why Is My FICO Score Lower Than My Credit Score?

Lenders use credit scores, but not all are the same, to determine a borrower’s creditworthiness. Consumers may become confused when they discover differences in their FICO scores from other credit scores.

Understanding the most popular credit scoring model, the FICO score requires understanding its differences from other models. This piece examines potential causes of decreased FICO scores and how lenders use these marks.

Understanding the Difference Between FICO and Other Credit Scores

Two well-liked credit rating schemes are FICO and VantageScore. The most popular credit score, FICO, is based on five primary factors: payment history, balances outstanding, duration of credit history, credit mix, and new credit. The system exhibits sensitivity to late payments, elevated credit use, and numerous recent inquiries.

Factors That May Cause Your FICO Score to Be Lower

Different scoring models, disparate data sources, credit usage sensitivity, duration since the last account opening, incomplete credit history, and frequent credit inquiries might contribute to lower FICO scores.

These elements may affect the score because FICO gives significant weight to credit use, the amount of time since the last account opening, and a variety of credit types.

Why Different Credit Scoring Models Can Give Different Results

Three key factors might cause credit scoring models to provide different results: changes in data sources, purpose-specific scoring models, and algorithmic variations. Different models have different weights assigned to variables such as credit usage, duration of credit history, and payment history based on their proprietary algorithms.

How Lenders Use FICO vs. Other Credit Scores?

90% of lenders base their decisions on a borrower’s FICO score when determining their creditworthiness. Lenders might consider additional credit scores like VantageScore for a more complete view of your financial situation. Whether a credit product is a credit card, house loan, or auto loan will determine which score is selected.

Steps to Align Your FICO Score with Your Other Credit Scores

You can raise your FICO score by optimizing your credit utilization, paying your payments on time, diversifying your credit mix, reducing the number of complex queries on your credit report, and accumulating more credit history.

It is imperative to maintain a credit usage ratio of 30%, make numerous monthly payments, and make on-time bill payments. Over time, increasing the variety of your credit can help you improve your FICO score.

Read related blogs: Personal Loan 500 Credit Score

Conclusion

Addressing the issue requires understanding the causes of differences in FICO and other credit scores. Different algorithms, data sources, and scoring models cause score variances.

Lenders often use FICO, but VantageScore and other alternative scores are common. FICO scores can gradually align with modest credit utilization, prompt bill payments, and credit mix diversification. Beem, your guide to a better financial future, your financial compass. Simplify credit monitoring and stay informed about your financial health with the Beem app.

People Also Ask

Why is my FICO score lower than my credit score?

Due to differences in data sources, credit utilization criteria, and scoring models, FICO scores may be lower. Additionally, FICO is more sensitive to late payments and excessive credit utilization.

What factors can cause a difference between FICO and other scores?

Data inconsistencies, scoring algorithms, credit bureau data, and weighting for credit categories can also contribute to score differences.

Which score is more important, FICO or VantageScore?

While VantageScore is becoming increasingly popular because of its more extensive consumer base, FICO is still vital to lenders when making significant credit decisions, such as mortgages and auto loans