Fico vs. the 3 Credit Bureaus: What is the difference?
Harrison Pierce is a writer and a digital nomad, specializing in personal finance with a focus on credit cards. He is a graduate of the University of North Carolina at Chapel Hill with a major in sociology and is currently traveling the world.Read full bio
At a Glance
Knowing the difference between FICO and the three credit bureaus is essential for taking control of your financial well-being. FICO, or Fair Isaac Corporation, is a data analytics firm that provides credit scoring services. On the other hand, the three credit bureaus are Equifax, Experian, and TransUnion. They collect information from lenders to generate reports about your credit history. In 2019, 11% of Americans didn’t even qualify for a FICO score due to a lack of credit history.
While both entities provide insight into your financial life, each company serves a distinct purpose. FICO works with the bureaus to develop valuable credit scores used by lenders. This score summarizes how well you manage debt or meet financial obligations. The credit bureaus store records of debt activities that reflect the full scope of your economic behavior, which goes beyond your score.
What is FICO?
FICO is a data analytics company specializing in credit scoring. Founded in 1956, it is best known for its FICO credit score, which is widely used by lenders to determine your creditworthiness. The FICO score is a number between 300 and 850 that summarizes your credit history and payment behavior, which helps lenders evaluate the risk of lending money to you. A higher FICO score indicates a lower risk of default, and as a result, if you have a high score, you are more likely to be approved for credit and receive better loan terms.
What does FICO do?
FICO provides analytics and decision management technology to various industries, including banking, credit card issuers, insurance, and retailers. The company’s primary focus is on using data and advanced analytics to help businesses make informed and automated decisions.
Apart from the FICO score, the company also provides other analytics solutions like fraud detection, marketing optimization, and debt management. Its technology is used by businesses to analyze large amounts of data and make real-time decisions based on the insights generated from that data.
Learn more: What is a FICO Score?
TransUnion, Equifax, and Experian
TransUnion, Equifax, and Experian are three of the largest credit reporting agencies in the U.S. They collect and maintain financial and personal information and provide credit reports to lenders, businesses, and consumers.
TransUnion provides credit reports, credit scores, and other financial information to businesses and consumers. It collects and maintains data on your credit history, including information on loans, credit cards, and payment history. TransUnion also offers identity theft protection and credit monitoring services to consumers.
Equifax also provides credit reports, scores, and identity theft protection services. It is known for its expertise in analytics and technology, which it uses to provide its customers with advanced insights and decision-making tools.
Experian is a global information services company that provides credit reporting and other financial services like credit monitoring and identity theft protection to businesses and consumers.
Learn more: What are the three credit bureaus?
What do they do?
These credit bureaus collect and maintain your financial and personal information and then use this information to generate credit reports and credit scores. Lenders, businesses, and consumers then use these credit reports and scores to assess your creditworthiness.
They collect information from a variety of sources, including lenders, banks, and other financial institutions, as well as public records. They use this information to create a comprehensive picture of your credit history, including information on loans, credit cards, payment history, and other financial activities.
Once this information is collected, the credit bureaus use algorithms and other analytical tools to generate credit reports and scores. These reports and scores summarize your credit history and payment behavior, and provide an overview of your creditworthiness. This information is then made available to lenders and other businesses, who use it to evaluate the risk of lending money or providing credit to you.
Difference between FICO and credit bureaus
FICO and credit bureaus serve different but related purposes in the credit and lending process.
FICO provides the FICO score, which is based on your credit history and payment behavior. The FICO score provides a snapshot of your credit profile and is used by lenders to assess your creditworthiness. The score ranges from 300 to 850, with higher scores indicating a lower risk of default and a better credit profile.
On the other hand, credit bureaus, such as TransUnion, Equifax, and Experian, collect and maintain your information to generate credit reports, which lenders and other businesses then use to evaluate the risk of lending money or providing credit to you.
While FICO provides a credit score that summarizes your credit profile, credit bureaus collect and maintain information on your credit history and use it to generate credit reports that provide a more detailed picture of your creditworthiness.
How are FICO, TransUnion, Equifax, and Experian related?
FICO, TransUnion, Equifax, and Experian are related in that they all play a role in the credit and lending process. The FICO score and credit reports from the credit reporting agencies are often used together by lenders to make lending decisions. This combination of information helps lenders to make informed decisions and assess the risk of lending money to the individual.
What is the Equifax credit score, and how is it different from FICO?
The Equifax credit score is a credit score provided by the company. It is based on your credit history and payment behavior, and is used by lenders to assess your creditworthiness.
Like the FICO score, the Equifax credit score ranges from 300 to 850, with higher scores indicating a lower risk of default and a better credit profile. However, there are some differences between the Equifax credit score and the FICO score.
One of the main differences between the Equifax credit score and the FICO score is the credit reporting data that they use. The Equifax credit score is based on credit data from Equifax, while the FICO score is based on credit data from all three major credit reporting agencies. This means that the Equifax credit score may differ slightly from the FICO score, as it is based on a more limited data set.
Another difference is that the Equifax credit score is proprietary, meaning that Equifax has sole ownership and control over it. In contrast, the FICO score is widely used and recognized and is available to both consumers and lenders through various sources.
It’s worth noting that while the Equifax credit score is one of the scores used by lenders, it is not as widely used as the FICO score and may not always be the score lenders use to make lending decisions. Lenders may use multiple credit scores or credit reports from different sources to assess creditworthiness and make lending decisions.
It’s difficult to say which credit bureau is the most accurate, as accuracy can vary depending on the individual and their specific financial history. Each credit reporting agency has its own methods for collecting and reporting credit information, and there may be differences in the data reported by each bureau.
However, it’s generally recognized that all three major credit reporting agencies are reputable sources of credit information. They all collect and maintain credit information on millions of consumers, and they take steps to ensure that the information they report is accurate and up-to-date.
That being said, it’s still important for you to regularly review your credit report from all three bureaus and dispute any errors you find, as even minor inaccuracies can significantly impact your score and financial opportunities.
There is a need for three credit bureaus because each collect and maintains a different set of financial and personal information on you, which can result in different credit reports. This provides a more comprehensive picture of your credit history and payment behavior and helps ensure that all relevant information is considered when evaluating creditworthiness.
Additionally, having multiple credit bureaus helps to provide competition and accountability in the credit reporting industry. Each credit bureau is incentivized to provide accurate and up-to-date information to attract and retain customers, which helps to ensure the quality of their credit information.
Having three credit bureaus also helps to reduce the risk of errors and inaccuracies in credit reporting. If there is an error on one credit report, it may not necessarily be reflected on the credit reports from the other bureaus. This allows you to dispute and correct any errors you find.
The FICO score is the most widely used credit score by lenders in the U.S. FICO is the leading provider of credit scoring models. Its credit score is used by most lenders, including banks, credit card issuers, and mortgage lenders, to assess the creditworthiness of borrowers.