Beacon Score Vs. FICO Score

The credit ratings known as Beacon and FICO are different names for the same thing. FICO, which is an acronym for Fair Isaac Corporation, is sometimes referred to as a Beacon credit score but the name is outmoded. One of the largest credit-scoring companies, Equifax, marketed the service under the name BEACON, thus the confusion. Your FICO score is your Beacon score. It's just not much referred to as a Beacon score anymore.

Never Enough Acronyms

Much like all the bank takeovers and name changes, FICO is now known as NextGen. It's no different than the Beacon or FICO scores. It's mostly a matter of marketing.

What Makes a Credit Score

A credit score gets into algorithms, which most don't know or understand unless you were paying close attention in high school math class. To put it simply: An algorithm takes a bunch of data and puts it into a formula to determine a result. In credit determination, the algorithms take into consideration numerous factors to determine a "score."

Your Algorithm

These are the approximate values that are plugged into the equation to determine your NextGen, FICO or Beacon score. Call it what you will. They carry the same meaning regardless of what they are called. When your categories of examination are looked at in the, let's call it FICO, you must have at least one account (credit or otherwise) that has been open for at least six months. On top of that, the account can't be dormant for six or more months. That's the basics that banks and credit card companies want to see when applying for a loan or credit card. If you're applying for a mortgage or other large loan, banks want to see more active lines of credit--usually at least three--that have been active in the previous year.

A Breakdown of the Numbers

These numbers are not exact but reliable industry estimates of how FICO, Beacon or NextGen (whatever you want to call them) uses them. Roughly, 35 percent of your score is based on late payments, bankruptcies, collections and judgments against you. An additional 30 percent is based on current debts, and 15 percent is based on how long you have established accounts. An additional 10 percent examines the type of credit cards or loans you have, and the remaining 10 percent looks at applications for new credit cards or inquiries potential creditors made. How those numbers fit into the equation is a mystery to most, but those are the major factors and their relative importance that determine your credit score.

What It All Means

In addition to NextGen, FICO and Beacon, two other credit-rating organizations exist that banks, potential business partners and employers look to when determining your credit worthiness. They are TransUnion and Experian. What the companies call their version of credit scores may be different, but all are evaluating the likelihood that you will make your payments. It's all about the risk. They are evaluating for others who are deciding whether to offer you credit. Numbers aside, your credit score compares the likelihood of you paying back your loans or debts. The bottom line is that the higher the score, the lower the risk and the more likely you will be approved for a credit card or loan.