Credit scores are numerical representations of a consumer’s creditworthiness. Lenders and financial institutions use credit scores to assess the risk associated with lending money to individuals. The two most popular credit scoring models in the United States are the FICO score and the CBI score. Although both models assess creditworthiness, they differ in several ways. In this essay, we will explore the differences between FICO scores and CBI scores, including their methodologies, score ranges, and use cases.
FICO score
First, let us look at the FICO score. The FICO score is a credit scoring model developed by the Fair Isaac Corporation in 1989. It is the most widely used credit scoring model in the United States, with 90% of top lenders using it to evaluate borrowers’ creditworthiness. The FICO score ranges from 300 to 850, with a higher score indicating better creditworthiness. The FICO score considers five factors in its credit assessment:
Payment history:
This factor looks at whether a borrower has paid their bills on time. Late payments, collections, and bankruptcies can negatively impact a borrower’s credit score.
Credit utilization:
This factor looks at the amount of credit a borrower is using compared to their credit limit. A high credit utilization ratio can negatively impact a borrower’s credit score.
Length of credit history:
This factor looks at how long a borrower has had credit accounts. A longer credit history can positively impact a borrower’s credit score.
Types of credit:
This factor looks at the types of credit accounts a borrower has, such as credit cards, auto loans, and mortgages. A diverse mix of credit accounts can positively impact a borrower’s credit score.
New credit:
This factor looks at whether a borrower has recently opened new credit accounts. Opening too many new accounts in a short period can negatively impact a borrower’s credit score.
The FICO score is widely used by lenders to assess a borrower’s creditworthiness. A high FICO score can help borrowers secure lower interest rates on loans, credit cards, and mortgages. However, a low FICO score can make it challenging to obtain credit or result in higher interest rates and fees.
CBI score
The CBI score is a credit scoring model developed by CoreLogic in 2017. Unlike the FICO score, the CBI score is not widely used by lenders. Instead, it is primarily used by landlords, property managers, and other entities in the rental industry to assess the creditworthiness of potential renters. The CBI score ranges from 360 to 840, with a higher score indicating better creditworthiness.
The CBI score considers six factors in its credit assessment:
- Rental payment history: This factor looks at whether a renter has paid their rent on time.
- Credit history: This factor looks at a renter’s credit history, including credit accounts, payment history, and bankruptcies.
- Employment history: This factor looks at a renter’s employment history and income stability.
- Public records: This factor looks at public records such as tax liens, bankruptcies, and judgments.
- Collections: This factor looks at whether a renter has any collections on their credit report.
- Inquiries: This factor looks at the number of inquiries on a renter’s credit report.
The CBI score is primarily used by landlords and property managers to assess the risk associated with renting to a particular tenant. A high CBI score can make it easier for renters to secure housing, while a low CBI score can result in higher security deposits or rental rates.
Compare FICO score and CBI score
Now let us compare the methodologies used by the FICO score and the CBI score. Both scores assess creditworthiness, but the FICO score and the CBI score use different methodologies to evaluate creditworthiness. The FICO score considers a borrower’s payment history, credit utilization, length of credit history, types of credit, and new credit. In contrast, the CBI score considers a renter’s rental payment history, credit history, employment history, public records, collections, and inquiries.
Additionally, the FICO score considers credit accounts from all industries, including credit cards, auto loans, and mortgages, while the CBI score focuses solely on rental payment history and credit history related to rental properties. This means that the CBI score is a more specialized credit scoring model, while the FICO score is a more general credit scoring model.
Another significant difference between the FICO score and the CBI score is the score range. The FICO score ranges from 300 to 850, while the CBI score ranges from 360 to 840. The higher range of the FICO score means that there is more room for differentiation between borrowers’ creditworthiness, while the narrower range of the CBI score means that there is less room for differentiation between renters’ creditworthiness.
In terms of use cases, the FICO score is widely used by lenders to assess creditworthiness across a broad range of credit products, including credit cards, auto loans, and mortgages. In contrast, the CBI score is primarily used by landlords and property managers to assess rental applicants’ creditworthiness.
Finally, it is worth noting that the FICO score is the older of the two credit scoring models, having been developed in 1989, while the CBI score is a newer model, having been developed in 2017. As a result, the FICO score has a longer track record of use and a more established reputation in the lending industry.
Conclusion
The FICO score and the CBI score are two credit scoring models used to assess creditworthiness. The FICO score is a widely used credit scoring model that considers payment history, credit utilization, length of credit history, types of credit, and new credit. The CBI score is a specialized credit scoring model primarily used by landlords and property managers to assess rental applicants’ creditworthiness. The CBI score considers rental payment history, credit history, employment history, public records, collections, and inquiries. While both scores serve different purposes, they play important roles in helping lenders and landlords make informed decisions about extending credit or renting properties to consumers.