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FICO Models Explained: Which Differences Matter Most

FICO has created the algorithm—of the same name—that most lenders in the United States use to find your credit score when you apply for a loan. The company releases an updated version of the algorithm to lenders every few years. Since lenders are not required to use the latest version of FICO, it’s important to understand how the algorithms differ as your score will be altered. In this guide, we’ll give you an in-depth look at the most commonly used versions of the FICO scoring model.

What is FICO 8 and Who Uses It?

FICO 8 is the most commonly used version of the FICO model. Like previous versions, it takes on-time payments, account balances, and other credit history into account when calculating your score. However, the FICO 8 model has a few features that you should be aware of before applying for credit.

FICO Model

Description
FICO 9Newest version. Not widely used.
FICO 8Most common. Used for Auto and Bankcard lending.
FICO 5Used by mortgage lenders. Built on data from Equifax.
FICO 4Used by mortgage lenders. Built on data from TransUnion.
FICO 2Used by mortgage lenders. Built on data from Experian.

One of the most important aspects about FICO 8 is that it’s more sensitive to high utilization of credit lines when compared to previous versions of FICO. We recommend that you stay under 30% credit utilization to keep your FICO 8 score from dropping due to high utilization.

On the other hand, FICO 8 has positive changes for consumers as well. Accounts in collections with balances under $100 are now ignored by your FICO score. Previously, all collections accounts were factored into your FICO score, no matter how small they were. Additionally, FICO 8 is more forgiving to one-off late payments of 30 days or more when compared to previous versions of the FICO model as long as all other accounts are in good standing.

There are two sub-versions of the FICO 8 score: FICO 8 Auto and FICO 8 Bankcard. As you’d expect, lenders use FICO 8 Auto to assess creditworthiness for auto loans and FICO 8 Bankcard to assess creditworthiness for new credit card accounts.

These specialized versions of the FICO 8 scoring model are similar to standard FICO 8, but with emphasis on a different part of your credit history. For example, FICO 8 Bankcard places a bigger emphasis on your behavior with credit cards than FICO 8 Auto. Despite these differences, your FICO 8 Auto and Bankcard scores will be largely similar to your standard FICO 8 score.

FICO 8 vs FICO 9: What Are the Differences?

FICO 9 is similar to FICO 8 but differs when it comes to collections and rent payments. FICO 9 counts medical collections less harshly than other accounts in collections, so a surgery bill in collections will have less of an impact on your credit score than a credit card bill in collections.

Additionally, FICO 9 ignores accounts in collections that have a zero dollar balance. If you had a credit card account go to collections but later paid it off, FICO 9 will no longer use said collections account against your score. This is different than FICO 8, which factors all collections amounts of $100 or more into your FICO score—even if they’re completely paid off.

Just because collections with a zero balance are ignored by FICO 9 does not mean that lenders will ignore them. Credit bureaus will still show these collections on your full credit report, and lenders will see them when they reviews your full credit history.

Finally, FICO 9 factors rental history into your credit score. This makes it easier for people with no credit to build a high credit score with their monthly on-time rent payments. Unfortunately, this is dependent on your landlord actually reporting rent payments to credit bureaus—something not yet seen on a large scale.

Most lenders have yet to adopt FICO 9 since it’s still new to the market. This will change as time goes on, so start monitoring your FICO 9 score now to ensure you don't encounter any surprises as the years go on. You can pay to view your official FICO 9 score on FICO’s official credit monitoring service. Unfortunately, there is no one offering a free FICO 9 score at this time.

What Are Older FICO Models?

FICO 8 and 9 aren’t the only versions in use. Some lenders and industries use older versions like FICO 2, 4, and 5. In fact, these are still used by the mortgage industry when assessing creditworthiness for new mortgages and deciding on interest rates.

FICO 2, 4, and 5 are very similar. The main differences between the three is that 2, 4,and 5 use data from Experian, TransUnion, and Equifax respectively. Mortgage lenders pull one of each and compile the reports in a document called a Residential Mortgage Credit Report. Duplicate data is screened and removed, and the middle score of the three is picked to represent your worthiness to pay back the mortgage.

FICO 8 and 9 use data from a single credit bureau, so using FICO 2, 4, and 5 together gives mortgage lenders a more complete view of your creditworthiness because they can see the history of every account you’ve opened. This is especially helpful for mortgage lenders as many creditors don't report account history to all three credit bureaus.

How Does FICO Differ from Other Credit Score Models?

VantageScore is another popular credit scoring model. Like FICO, VantageScore 3.0 grades credit on a 300 to 850 point scale and takes credit utilization, credit inquiries, and on-time payments into account. However, the two models differ in a few ways, with one major difference. FICO penalizes all late payments the same way, while VantageScore penalizes late mortgage payments higher than other late payments.

FICO and VantageScore also differ in how they handle combining similar credit inquiries. With FICO, you have a 45 day grace period where similar credit inquiries for auto loans, mortgages, and student loans are combined into one inquiry. VantageScore gives you a smaller 14 day grace period, which can make comparison shopping for loans harder.

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