FICO 5 vs. FICO 8: What Are the Differences? (2024)

Credit scores are one of the main things that lenders look at in deciding whether to extend credit to you. While that may seem simple enough, many consumers don’t realize that they can have more than a single credit score. In fact, there are multiple credit scores that lenders use to evaluate credit applications in 2023.

Most lenders rely on FICO Scores from the company of the same name. And even FICO Scores come in different shapes and sizes. Two of the most common are the FICO Score 5 and the FICO Score 8. Both are used by lenders to determine a prospective borrower’s creditworthiness. But FICO 5 is commonly used in the mortgage lending industry, while FICO 8 is mainly used by credit card issuers.

This article explains how the two scores differ.

What Is FICO Score 5?

FICO Score 5 is a scoring model that is commonly used by lenders in the mortgage and auto loan businesses. Your FICO 5 score is based on the information in your credit history, weighted like this:

• Payment history (35%)
• Accounts under your name (30%)
• Credit history length (15%)
• New credit (10%)
• Credit mix (10%)
  

But that’s not all. FICO 5 goes beyond these factors to include other information, such as your employment history, medical accounts, and residential history. Since mortgages are very large loans, lenders tend to be more cautious with them. As such, lenders, especially banks, rely on FICO 5 rather than other FICO Scores because it is less forgiving of unpaid collection accounts.

FICO 5 itself comes in several different versions, including one each for mortgages, automobile loans, and credit cards.

People who pay their bills on time and have a reasonable number of open accounts, an established credit history, and a good mix of credit types earn higher FICO 5 scores. Lower scores are associated with people who miss payments, have accounts in collection, don’t have enough credit, or simply have little or no credit history.

The FICO 5 score comes exclusively from the credit reporting agency Equifax, which is one of the three major credit bureaus. A lender may also pull your FICO Score 2 and FICO Score 4 (which are similar to FICO 5) from Experian and TransUnion, respectively. All of this information is compiled into what is called a residential mortgage credit report. The lender typically uses the number that falls in the middle of all three scores when it makes its decision.

What Is FICO Score 8?

FICO 8 was introduced in 2009. According to FICO, the new scoring system works consistently with older FICO models but has some unique features that make it “a more predictive score” than prior versions.

This is the score most commonly used by credit card issuers, so when you apply for a credit card, the company generally pulls a FICO 8. Like all other FICO Scores, FICO 8 is meant to convey how responsibly you handle debt. For example:

• Scores tend to be higher for consumers who pay their bills on time, keep low credit card balances, and only open new accounts for targeted purchases.
• Scores are lower for those who are frequently delinquent, overleveraged, or appear to be frivolous in their credit decisions. FICO 8 also completely ignores collection accounts if the original balance was less than $100.

The additions to FICO 8 include increased sensitivity to highly utilized credit cards. This means that low credit card balances on active cards can more positively influence a borrower’s score. The score also treats isolated late payments more judiciously than past versions, so FICO 8 can be forgiving if your late payment last year was a one-off occurrence and all of your other accounts are in good standing.

FICO 8 also divides consumers into more categories to provide a better statistical representation of risk. The primary purpose of this change was to keep borrowers with little to no credit history from being graded on the same curve as those with robust credit histories.

FICO 8 draws on information from all three major credit bureaus.

Key Differences at a Glance

To sum up the major differences noted above:

• FICO 5 is more likely to be used by mortgage lenders (and, in some cases, financial institutions that issue auto loans) because a lot of money is at stake. It is less forgiving of unpaid collection accounts—particularly medical ones.
• FICO 8 is more commonly used by credit card companies. This is partly because it is highly sensitive to large credit card balances that are close to the card’s limit. It is also tougher on repeated late payments than FICO 5.
• FICO 5 relies solely on data from the credit reporting agency Equifax, while FICO 8 uses data from all three major credit reporting agencies: Equifax, Experian, and TransUnion.
• FICO 8 is more tolerant of infrequent late payments, especially those that are one-off, than older FICO Scores like FICO 5. This is true provided that all of your other accounts are in good standing.
  

The Bottom Line

Lenders use a variety of different credit scores to decide whether to make a loan or offer you a credit card. Two of the most common ones are the FICO Score 8 and the FICO Score 5. While these two scores take some different factors into account, both reward a consistent record of paying bills on time and handling credit responsibly.