First of all, when talking to members about their credit score, it's crucial they understand the basic importance of the score. A credit score tells your credit union how likely a member is to pay back a loan based on their credit history, and is calculated using information from a member's credit reports. Credit scores typically range from 300-850, the higher the score the better, as it indicates the member is lower risk to potential lenders, and will determine how willing a lender is to not only offer a loan, but compete for their business by offering lower interest rates and better terms. Conversely, a low credit score may result in higher rates, or perhaps even shut the member out from receiving loans or credit altogether.
Calculating a credit score is done by using data from a member's credit report from the 3 credit bureaus: Equifax, TransUnion and Experian. Credit scores change over time and could vary slightly based on what credit bureau the score is obtained from. Enter the FICO® Score.
Most lenders - 90 % of the top lenders, in fact - use FICO® Scores as the standard for credit scores. For over a quarter of a century, FICO® Scores (created by the Fair Isaac Corporation) are considered the gold standard for accurate and reliable scoring. They are touted for being the most fair and focused method of obtaining a trustworthy score. Members would benefit from knowing their FICO® Score as it is a true representation of their credit worthiness, and may be the deciding factor on what car they choose, house they buy, etc. Credit unions benefit from FICO® Score knowledge as they aren't adding additional risk to their lending decisions. It boils down to that reliability ranking: While most airlines will deliver you to your destination, not all will do so on time. While all FICO® Scores are credit scores, not all credit scores are FICO® Scores.
*FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.