FICO vs. Experian: What's the Difference?

Credit reports are different from credit scores which are different from credit score models. And then there are the credit bureaus that balance all of the information. To give you a better understanding of how it all works, we’ll break down two of the leaders in the credit world: FICO vs. Experian.

FICO is a company that provides scoring models and consulting services, while Experian is a credit bureau that collects and maintains consumer credit information. Both FICO and Experian play important roles in the world of credit, but they serve different purposes. Understanding the differences between the two can help you better get to know your credit history and make informed financial decisions in the future. 

Highlights/Key Takeaways

• FICO provides credit scoring models, while Experian is a credit bureau that collects account information from consumers and generates reports.
• Consumers have many different FICO scores, all used by different types of lenders to make lending decisions. 
• Experian also offers other features such as credit monitoring and ID protection. 

What Are the Main Differences Between FICO and Experian?

FICO and Experian are both involved in the credit industry, but they serve slightly different functions. FICO specializes in credit scoring models (of which they have many) and provides these scores to lenders, landlords, and more to help them make lending and other financial decisions. 

Experian, on the other hand, is one of the three major credit bureaus (Equifax, Experian, and TransUnion) that collects consumer credit information that is used to generate both credit reports and scores. Again, lenders look at this more detailed information to help them decide if they should lend to you and what rates to offer you if they do. 

Lenders won’t just look at your FICO score or your Experian reports to make their decisions. Many lenders look at all three reports given by all three bureaus so they’re better informed, as not all accounts report to all three bureaus. 

Here’s a table that sums up the main differences between FICO and Experian:

What Is FICO?

FICO stands for Fair Isaac Corporation, which is a data analytics company that focuses on credit scoring and credit risk assessment. The company was founded in 1956 by Bill Fair and Earl Isaac, who developed the first credit scoring system based on data analysis and statistical modeling. The first ever FICO score, which is now used by most lenders today, was introduced in 1989 and paved the way for future systems like VantageScore. 

FICO is now a global company that provides credit scoring and analytics to over 90 countries. FICO scores are used by lenders, credit card companies, and other financial institutions to evaluate the credit risk of borrowers and make informed lending decisions.

FICO's credit scoring models are based on a range of factors, including payment history, credit utilization, length of your credit history, and the types of credit used, among other factors. The scores range from 300 to 850, with 300 being the lowest score possible and 850 being the highest.

FICO Credit Score Calculation 

FICO provides information on how credit scores are weighted across the different categories it measures. Here's what each category includes and how much of your score it makes up:

• Payment history (35%): Your payment history has the most bearing on your credit score. If you’ve paid your bills on time consistently and never missed a payment, this can help your score go up. 
• Amounts owed (30%): This category looks at how much debt you have, both in terms of your overall debt load and your credit utilization. Your credit utilization is the percentage of your available credit that you’re currently using. High credit utilization can indicate that you’re overextended and may be at a higher risk of defaulting on your debts.
• Length of credit history (15%): Your credit history is simply how long you’ve been using credit. If you got your first credit card at 18, that’s when your credit likely started. Generally, a longer credit history is seen as more positive, as it provides more information about your creditworthiness.
• Credit mix (10%): Your credit mix includes the different types of credit you have, such as credit cards, installment loans, and mortgages, for example. A diverse credit mix is often seen as positive, to an extent. This indicates that you’re able to manage different types of credit responsibly. 
• New credit (10%): This category looks at how recently you’ve opened new credit accounts. Opening multiple new accounts in a short period of time can be seen as a red flag by lenders, as it likely indicates that you’re taking on too much debt too quickly.

FICO Credit Score Ranges

As mentioned above, FICO’s scores range between 300 and 850. The higher the score, the better your credit and the easier it will be to qualify for the best loan and credit options. Here’s a breakdown of what each score range means:

• 300 to 579 = Poor
• 580 to 669 = Fair
• 670 to 739 = Good
• 740 to 799 = Very good
• 800 to 850 = Exceptional 

Different FICO Models 

FICO has many different models for generating credit scores. Each model is designed for a specific type of lender or industry, so each uses a different algorithm to calculate your credit score. Here's an overview of some of the most commonly used FICO models:

• FICO 2: This model is used by many mortgage lenders. This model is typically used by Experian, so lenders that pull your Experian report will be relying mostly on this model.
• FICO 4: This model is also used by mortgage lenders, but is mostly used in TransUnion’s calculations.
• FICO 5: The FICO 5 model is the last one used by mortgage lenders, and is primarily used by Equifax. 
• FICO 8: This model is one of the most commonly used FICO models across the board.  It’s used by many lenders, including credit card companies and personal loan providers. All three credit reporting agencies use the model frequently. 
• FICO 9: This model is the most recent version of the FICO score and is used almost as often as the FICO 8. The model is designed to be more predictive than previous ones. It places less emphasis on medical debt and collections accounts that have been paid off, and also considers rent payments in credit reports.
• FICO 10: Another new model, the FICO 10 was introduced recently and is designed to be more comprehensive and include data from the last five years since the FICO 9 was introduced.

What Is Experian? 

Experian is one of the three major credit bureaus in the United States alongside Equifax and TransUnion. The job of these credit bureaus is to collect and maintain information on consumers' credit histories, including credit accounts, payment history, and other financial behaviors. This information is used to create credit reports, which generate your credit score. Both of these are used by lenders, landlords, and others to evaluate your creditworthiness and financial responsibility.

Although the players involved in Experian date all the way back to 1803, Experian was technically founded in 1996 as a result of a merger between the TRW Information Systems and Services division and the UK-based credit bureau CCN Group. 

Experian, just like the other two credit bureaus, has since gone beyond basic credit reporting, offering other services like credit monitoring and identity protection. 

Experian Credit Reports

A credit report is a detailed record of your credit history. It’ll include information on your credit and loan accounts, your on-time payments (and missed payments), and inquiries. Experian’s 

• Personal information: This is pretty basic information that can help you make sure the report really belongs to you. It’ll include your name, current and previous addresses, date of birth, and your Social Security number.
• Accounts: This section includes information on your credit accounts, both past and present. Credit cards, loans, and mortgages will all be listed here and will include the name of the creditor, your account number, the date the account was opened, and your payment history.
• Collections: If any loan you’ve missed payments on has been sent to collection agencies, this information will appear on your credit report as well. It’ll list the name of the collection agency, the original lender you got the loan from, the date the account was sent to collections, and how much you owe.
• Public records: Bankruptcies, tax liens, and civil judgments are all part of the public record. These items can have a significant negative impact on your credit score for years.
• Credit inquiries: This section includes a list of all the entities that have requested your credit report in the past two years. This includes lenders, credit card companies, and landlords.

Experian Credit Scores

The exact formula for calculating your Experian credit score is not publicly disclosed, but we do know that the score is based on several factors similar to FICO. These include:

• Your payment history
• Your credit utilization
• The length of your credit history
• The types of credit accounts your have
• Recent credit behavior (both good and bad)

Experian uses the FICO 8 model in most of its calculations, and you can get your score for free once a month via Experian’s site. 

How Lenders Use FICO and Experian 

Lenders use credit scores to help determine an individual's creditworthiness and how likely they are to repay a loan. While each lender may have their own specific lending criteria, credit scores are an important factor in the decision-making process.

FICO scores are widely used by lenders, with over 90% of top lenders using FICO scores to make credit decisions. The FICO 8 is the most commonly used model used by lenders, but industry-specific models are also used to help make lending decisions.  

Similarly, lenders often use Experian’s credit reports and credit scores to evaluate loan applications as well. Since Experian’s reports and scores are based, in large part, on FICO’s model, the companies work in harmony with each other to help lenders and borrowers understand their credit scores. 

Here are the common credit bureaus and scoring models used by each type of lender:

Understanding Your Different Credit Scores 

To many peoples’ surprise, you have multiple credit scores. While FICO holds the top spot in credit scoring models and provides numerous scores based on different models, it’s not the only one out there. 

In addition to FICO scores and Experian credit reports and scores, there are also credit scores from other credit bureaus such as TransUnion and Equifax. Furthermore, some lenders may have their own scoring models that don’t even consider credit as a factor.

Checking Your Credit 

Checking your credit score isn’t hard anymore. You used to be able to just get one free yearly report from each bureau at Annualcreditreport.com. Now, there are a number of free and paid options that let you check your score monthly, weekly, or sometimes even daily. These options include:

• Creating a myFICO account and signing up for any of the plans that allow you to check your score and much more.  
• Signing up for an Experian account and checking your FICO 8 score for free.
• Via statements from your bank, credit card company, or loan servicer that provides a credit score feature.
• Using free services like Mint and Credit Karma to monitor your credit score. 

Improving Your Credit Scores

Your scores won’t be off by too many points, but you can improve all of your scores in just a few simple steps:

• Make all your payments on time: Making payments on time every month for all of your bills is the best way to jump your score up over time. 
• Keep your credit utilization low: Try to keep your credit utilization below 30%, which is what most lenders want. 
• Pay down your debt as quickly as you can: Debt ups your credit utilization, so paying down everything from credit cards to student loans can help you keep your score up. 
• Build an emergency fund to avoid overreliance on credit: The reason so many of us rely so heavily on debt in the first place is that we don’t have an adequate emergency fund in place to cover unexpected costs. 
• Keep your oldest accounts open if you can: Closing old accounts can reduce your overall credit history length, which can potentially have a negative effect on your score. 
• Monitor your credit report regularly: Monitoring your score is free for the most part, and doing so gives you ample time to learn how to contact credit bureaus and dispute any errors you may find. 

Final Word

While FICO is a company that provides the many credit scoring models lenders use, Experian is primarily a credit bureau that collects and sells credit information to lenders and other companies. Lenders often use FICO and Experian in tandem with each other to make internal lending choices. That said, when you, as an individual, want to get your full-length credit report, you’ll need to visit Experian for this. 

It's important to keep in mind that both FICO and Experian scores are just one piece of the puzzle that lenders use when making lending decisions. Other factors such as income, employment history, and debt-to-income ratio all also play a role in lending decisions.