When it comes to credit scores, FICO and TransUnion are two of the most well-known options. But which one is better for accurately assessing your creditworthiness? There are some key differences between FICO and TransUnion credit scores that are important to understand.
What is FICO?
FICO is short for Fair Isaac Corporation, the company that created the FICO credit risk scoring model. FICO scores range from 300 to 850 and are calculated based on information in your credit reports from the three major credit bureaus – Experian, TransUnion, and Equifax.
FICO scores take into account five main factors:
- Payment history (35% of score)
- Amounts owed (30%)
- Length of credit history (15%)
- New credit (10%)
- Credit mix (10%)
Payment history and amounts owed are the most heavily weighted factors. FICO scores are used by 90% of top lenders to help make decisions on credit applications.
What is TransUnion?
TransUnion is one of the three major credit bureaus, along with Experian and Equifax. TransUnion collects information about your borrowing and payment history from lenders and creditors and compiles it into a credit report.
In addition to credit reports, TransUnion also offers its own proprietary VantageScore credit scoring model. TransUnion VantageScores are also on a scale from 300 to 850.
The VantageScore factors in:
- Payment history
- Age and type of credit
- Percentage of credit limit used
- Total balances and debt
- Available credit
- Recent credit applications
- Type of credit used
Payment history has the greatest impact, but the scoring model is designed to emphasize a wide range of factors.
Key Differences
Here are some of the main differences between FICO and TransUnion scores:
- Scoring models: FICO uses its own proprietary model while TransUnion uses VantageScore, which was developed jointly by the three credit bureaus.
- Credit report data: FICO scores use credit data from all three bureaus while TransUnion scores rely only on TransUnion credit reports.
- Scoring factors: The FICO model emphasizes payment history and amounts owed most heavily. TransUnion also looks at credit utilization but incorporates additional factors like credit age and inquiries.
- Industry adoption: FICO scores are used by 90% of top lenders while TransUnion is less widely adopted.
- Access for consumers: FICO scores are available for purchase by consumers directly from FICO. TransUnion scores are provided free on TransUnion credit reports.
FICO Scores vs. TransUnion Scores
When comparing FICO and TransUnion scores, there are some key similarities and differences to note:
- Both score types use a range of 300-850.
- Higher scores indicate lower credit risk in both models.
- Payment history is the most important factor in both FICO and TransUnion scores.
- FICO emphasizes amounts owed and credit history length more than TransUnion.
- TransUnion incorporates more factors like credit inquiries and mix of credit.
- FICO scores are calculated using all three credit bureau reports while TransUnion only uses its own data.
Here is a comparison of the weighting of different factors in FICO and TransUnion scoring models:
| Factor | FICO | TransUnion |
|---|---|---|
| Payment history | 35% | Extremely influential |
| Amounts owed | 30% | Highly influential |
| Length of credit history | 15% | Moderately influential |
| New credit | 10% | Moderately influential |
| Credit mix | 10% | Less influential |
| Credit inquiries | Not factored | Moderately influential |
| Credit utilization | Not factored directly | Highly influential |
As you can see, FICO places a greater weight on payment history and amounts owed, while TransUnion incorporates additional factors like inquiries and credit utilization.
Which scores do lenders use?
The majority of lenders and creditors rely on FICO scores when evaluating credit applications. According to FICO, 90% of top lenders use FICO scores to make lending decisions. This includes credit card issuers, banks, credit unions, auto lenders, and mortgage lenders.
TransUnion scores have not gained as much traction in the lending industry. Most lenders will only review TransUnion VantageScores if the applicant specifically requests they do so. Even then, they will usually evaluate the FICO score first.
So while you will see your TransUnion score for free whenever you check your TransUnion credit report, lenders will most often rely on your FICO scores from all three credit bureaus when making decisions.
Accuracy in assessing credit risk
When it comes to accurately predicting credit risk, FICO scores are generally viewed as the gold standard. There are a few reasons for this:
- FICO scores have been around since 1989 and have decades of consumer data behind them. The scoring formulas have been tested, validated, and refined extensively using real-world data.
- TransUnion’s VantageScore model was introduced more recently in 2006. It has less historical data behind it.
- FICO scores use credit report data from all three major bureaus while TransUnion only looks at its own report information.
- FICO scores place greater emphasis on payment history and amounts owed – two factors highly predictive of credit risk.
Statistical studies have found the FICO scoring model is very accurate, predicting risk on par with credit bureau models in over 90% of cases. The Federal Reserve has also concluded FICO scores are highly predictive of credit performance.
For these reasons, most lenders view FICO as the more robust and accurate score for credit risk assessment.
Ease of access for consumers
In terms of accessibility, TransUnion scores have one advantage – they are provided for free whenever you check your TransUnion credit report either online or by requesting your annual free report. You can easily view and monitor your TransUnion VantageScore.
FICO scores are not provided with your free credit reports. If you want to access your FICO scores, you need to purchase them directly from FICO or from a credit monitoring service that provides FICO scores. There is a cost involved.
Here are some options for accessing your FICO scores as a consumer:
- Buy them directly from FICO at www.myfico.com. Price: $19.95-$39.95 per bureau.
- Get them from a credit monitoring site like Credit Karma. Price: Free with credit monitoring membership
- Purchase them through your bank or lender if offered. Price: Varies.
So while TransUnion scores are more readily available, you may need to spend money to access your FICO scores that lenders actually evaluate.
Similarity of scores
An important question is how much do TransUnion VantageScores align with FICO scores? Are the scores similar or vastly different?
Studies have shown fairly high correlations between TransUnion VantageScores and FICO scores when they are calculated based on the same credit data. However, there can still be some differences between the scores.
According to VantageScore Solutions, the median difference between someone’s TransUnion VantageScore and their Equifax FICO score is 20-40 points based on broad consumer data. But that median difference can vary more widely for individual consumers.
Some key reasons your specific TransUnion and FICO scores may differ:
- Only TransUnion data is used for your TransUnion score while FICO incorporates all three reports.
- If the information in your TransUnion report differs from your other two reports, it will produce score differences.
- The two models weigh factors like credit usage and inquiries differently.
- FICO is more sensitive to differences in payment history and amounts owed.
So while directionally your TransUnion score gives you an idea of your credit standing, don’t expect it to perfectly match your FICO score that lenders review. The only way to know your exact FICO scores is to purchase them directly from FICO or a credit monitoring service.
Which scoring model is better?
Based on the widespread industry use, track record over time, and accuracy in predicting risk, most credit experts agree that FICO scores remain the “gold standard” for assessing consumer creditworthiness. The judgment of most lenders is that FICO is superior:
- FICO has decades of consumer credit data behind it and has been tested extensively.
- It is proven to be extremely accurate in predicting credit risk.
- The emphasis on payment history and amounts owed covers the two most predictive credit factors.
- FICO uses a tri-bureau approach for a complete credit picture.
However, TransUnion scores have some benefits as well:
- They are easily accessible for free with your credit report.
- The additional factors beyond payment history provide a broader view.
- The scores are directionally useful even if they differ somewhat from FICO.
One scoring model is not necessarily “better” than the other universally. Both aim to assess credit risk and each has strengths and weaknesses. But FICO remains the trusted standard for lenders evaluating credit applications, and is statistically proven to be highly predictive.
How to improve each score
The good news is the ways to improve your FICO and TransUnion scores are largely the same, since they emphasize similar credit factors:
- Pay all bills on time. Payment history has the greatest impact on both scoring models. Set up autopay if needed.
- Keep credit card balances low. High utilization hurts both FICO and TransUnion scores. Aim for less than 30%.
- Monitor all 3 credit reports. Mistakes happen – check reports regularly for errors that damage scores.
- Mix up credit types. Having credit cards, retail accounts, installment loans, and a mortgage can help.
- Limit new credit applications. Too many hard inquiries in a short span can lower both scores.
- Build long credit history. Having established accounts helps boost your scores with time.
By practicing good credit habits, over time you can see improvements in both your FICO and TransUnion scores.
Final Thoughts
To summarize key points:
- FICO scores are more trusted and widely used than TransUnion scores for credit decisions.
- FICO has a long track record of accuracy based on tri-bureau data.
- TransUnion scores incorporate more factors but are less tested.
- Scores can differ but will be directionally correlated for an individual.
- Check all 3 credit reports and know your FICO scores that lenders review.
- Good credit practices raise your FICO and TransUnion scores.
While checking your free TransUnion score is useful, make sure you also monitor your FICO scores that lenders rely on most. Understanding both models gives you a complete credit picture and helps you make smart financial decisions.
