What is FICO?…
FICO is just a company; it sells algorithms to determine your risk of default based on various factors; and this risk changes based on what type of credit you want. FICO has hundreds of different scores for different industries ranging from the consumer credit score you see on creditkarma.com to the credit card score you see with Capital One, Discover, etc. (and others) which is also different from an auto loan or a mortgage loan score, and the list go on.
To frustrate you further, FICO has different versions of credit scores. It’s the same way Windows or iPhone operates, you have version 1 through whatever, and FICO works the same way- it is currently on version 8 with 9 new to the market.
Of course, credit wouldn’t be complicated enough unless there was another twist. Finance companies also pick and choose which credit bureau to use to determine whether it should extend you credit- it’s usually just one (except mortgage lenders, they use all three). But don’t forget there are different versions of FICO, and industry specific FICO scores.
For example, a car dealership may pull an Experian FICO 8 credit score to give you a quote for interest rate and payments, but the finance department might be using Experian FICO Auto Score version 4 to approve your loan- hence why you may be approved for a lower rate.
So how do you know which FICO score a company is using?
You don’t. In many cases, even when you ask the finance department they have no idea.
How much do FICO credit scores vary?
A lot. We see about a 100-point difference between creditkarma.com and freecreditscore.com for people who are normally above 700 on creditkarma.com. It’s always disturbing, and right now many are not a big fan of what Experian (yep, they own freecreditscore.com) is doing – with their “Free” service and their “Credit Builder” add on services for a monthly fee.
However, credit scores matter when you want something, like a house or a car or a credit card, and in those cases a normal difference is 20 to 60 points. So if you are above 700- you have good credit – and are in good shape. But when you are below 600 on creditkarma.com or freecreditscore.com things can be a bit more expensive (higher interest rates, higher down payments, denials, etc).
The goal of credit should be to have good credit. Normally, if you have good creditkarma.com scores (720+) you will be in great shape for approval. Also, factors like interest rates are negotiable so ask for a lower rate when you have good credit.
The point is, if you have “good” credit then don’t worry about the difference in scores, use your negotiation skills on price and interest rates. If you don’t have good credit, then focus on improving it.