Definition
A FICO score is a credit risk scoring model based on a proprietary formula developed by Fair Isaac Corporation.
Analysis
A FICO score is marketed by each of the three main credit bureaus. FICO scores are available to lenders for lending decisions, account reviews, collection efforts and even for solicitation attempts. They are also used by employers and landlords.
FICO scores are the most widely accepted scoring model by commercial users. FICO scores are backed by decades of research into consumer behavior, and are arguably the most accurate predictors of consumer responsibility.
FICO scores are tweaked by each credit bureau that subscribes to the model. They all market their own versions of FICO scores to commercial clients.
Equifax provides the Beacon score and TransUnion markets the Empirica score. Experian‘s version of the FICO score is its Experian/Fair Isaac Risk Score.
The classic FICO score was the most commonly used credit scoring system used for many years. NextGen may replace the classic FICO score as more lenders seek to serve subprime borrowers.
VantageScore was created by the credit bureaus as a way to wean themselves from expensive licensing fees from Fair Isaac for its FICO scoring models. However, lenders overwhelmingly prefer FICO based scores to the relatively unproven VantageScores.
