4 Common Types Of FICO

Prior to Fair Isaac developing the credit scores, most lenders use to actually manually examine each applicants credit report and credit history to determine whether or not to extend credit. This manual process was highly time consuming and sometimes resulted in large human errors.

The credit scoring formula was developed to help lenders make better judgments more quickly thus allowing them to service customers better. In general, the credit scoring formula looks at lots of variables such as mortgage debt, credit card debt, total debt to income ratio, other types of debt, number of late payments and various other variables.

One thing most people looking for a loan fail to realize is that depending on the type of loan you are applying for, the lender may use a different version of the FICO credit score. Lenders use various versions of the Fair Isaac FICO scores to better manage their risk. Since certain loans have different risks to a lender, using a different FICO score formulas allows lenders to measure the risk that is most appropriate for the loan being applied for. For instance, a motorcycle loan may have different risk than a mortgage loan to a lender, thus the lender would use a different FICO score formula. The goal of this article is to provide an understanding of the different types of credit scores you may see when applying for credit.

Classic FICO