FICO, Equifax, Experian & TransUnion - are they the same?

Credit: FICO vs. Equifax, TransUnion & Experian

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Your credit score matters when applying for a new home loan. It impacts the types of loans and terms you qualify for. However, navigating your FICO score while knowing what Equifax, TransUnion & Experian do is complex.

Are FICO, Equifax, TransUnion & Experian the Same?

No. In fact, FICO has one role while Equifax, Experian & TransUnion have another regarding your credit score. While the terms are used interchangeably and largely seen as synonymous in reality they couldn’t be further from mirror images of one another.

Aside from determining your rarely used Vantage credit score, Equifax, TransUnion and Experian have nothing to do with calculating your credit score while FICO has everything to do with it.

What Equifax, TransUnion & Experian Do

The role the 3 credit bureaus (“the big 3”) play surprises most. In fact, while having nothing to do with calculating your numerical credit score – Equifax, Experian & TransUnion do largely factor into that magical number.

In short, Equifax, Experian & TransUnion provide data to your credit report. In other words, each reports info about your credit habits and history to your credit report. For example, the data reported includes:

  • name of creditors you pay
  • your on time & late payment history
  • balances owed
  • monthly payment amounts
  • collections/judgments & public records

What Does FICO do?

On the other side of this credit union, FICO’s role is to provide the advanced algorithm responsible for crunching the big 3’s data into your numerical credit score. It’s that simple – Equifax, Experian & TransUnion provide data. Then, FICO calculates that data into a credit score.

50 + Different FICO Score Models

FICO is short for Fair Issacs Corporation. FICO is a company that (among many other products) produces credit score calculations used to determine your credit score. In fact, to date FICO owns over 50 credit scoring models used worldwide. These 50+ scoring models (aka – algorithms) each crunch the data provided by Equifax, Experian & TransUnion into a different numerical credit score for you.

While it sounds complex, the truth is having 50+ different credit score models (and therefore up to 50 different credit scores at a time) makes the lending world a better place. In short, having multiple variations of tailor fit FICO credit score models helps lenders make prudent lending decisions relative to how a consumer performs related to a specific sector or credit type.

Think of credit scores like Jeans. Stores selling “one size fits all” jeans would allow a small segment of the population to show off how good they look in denim. Alternatively, the store selling straight leg, boot cut, slim, tall, short and every other variety of jeans more accurately addresses the jean needs of the nation. Having credit scores work like the second store helps creditors more accurately fit clients into different products rather than excluding them on a one size fits all credit score approach.

Credit Data + FICO Calc = Credit Score

In conclusion, FICO along with Equifax, Experian and TransUnion combine to create the credit scores your mortgage lender sees. The big 3 bureaus feed data about you into a fancy calculation created by FICO. The end result is your credit score – all 50 + of them!

In conclusion, a way to sum this all up and tie what your understanding was prior to reading this article with what it is now is this – there are 2 ways to say what credit score your lender used:

  1. “my FICO score is 740”

2. “The credit score that my mortgage lender used was the middle score of 3 credit scores that were determined by analyzing data Equifax, Experian and TransUnion provided to a version of a FICO credit scoring algorithm created by a company called Fair Issacs Corporation specifically for the mortgage industry.”

Safe to say option 1 is the better choice. However, option 2 tells the whole story. Either way – the result is the same!

By Jeremy House