Whether you have recently started your credit life, have a long credit history or just now planning to start building or rebuild your credit, it’s important to understand credit scores. Credit scores can be a confusing subject. You probably have heard someone talk about FICO score, but maybe you have also heard someone talk about VantageScore or educational scores. So, what’s the difference between FICO score and other credit scores? Are they the same? If they aren’t, which one is more important or fits with you the best?
Credit scores are numbers that lenders use to evaluate your creditworthiness. They can affect your ability to get approved for a credit card, mortgage, or personal loan, as well as the interest rates you’ll pay on those loans. When these scores are low, lenders may consider you a risk borrower and it can be difficult for you to get credit or a loan. This score is assigned based on the information that lenders provide to any (or all) of the major credit bureaus — Equifax, Experian, and TransUnion concerning your financial behavior. Each of these bureaus might have different information about you in their credit reports. Given that credit scores are based on these individual credit reports; your credit scores can vary considerably one from another depending on which report they are based on. There are different companies that offer credit scoring models, and it’s essential for you to know at least the most important ones: FICO Score and VantageScore.
FICO Score Credit Scores
When talking about credit scores, FICO leads the pack, but as we said before, it’s not the only credit score. Created by Fair Isaac Corporation, in 1989, FICO scoring model set the base for the modern credit scoring models. According to FICO, more than 90% of top lenders use FICO scores. FICO also offers industry-specific scoring models (and scores) for distinct credit products, such as auto loans, credit cards, and mortgages; so your bank-provided FICO score can be different from the scores the lender sees when you apply for credit.
FICO also updates its scoring models as time passes by. Currently, FICO Score 8 is the most used version, although FICO Score 9 has already been released. FICO defines the following credit ranges based on FICO Score 8 credit scores:
* Exceptional: 800+
* Very good: 740 to 799
* Good: 670 to 739
* Fair: 580 to 669
* Poor: 579 and below
FICO scores range from 300 to 850, and these are the weight factors on the score:
* Payment history: 35%
* Amounts owed: 30%
* Length of credit history: 15%
* New credit: 10%
* Credit mix: 10% You can get your FICO Score for free from some credit card issuers or you can try the Discover Credit Scorecard, which gives a free FICO score to anyone who signs up for an account.
Vantage Score Credit Scores
Created in 2006 by the three credit reporting agencies, this credit score is becoming very popular. According to VantageScore, more than 2,200 financial institutions use its credit scores.
VantageScore base their scoring model on the following factors:
* Payment history: extremely influential
* Age and type of credit: highly influential
* Percentage of credit limit used: highly influential
* Total balances and debt: moderately influential
* Recent credit behavior and inquiries: less influential
* Available credit: less influential The latest VantageScore model the VantageScore 4.0 ranges from 300 to 850. The great advantage of this special model is that you could get a VantageScore after just one month of credit history and one account reported within the previous 24 months while FICO requires at least six months of data before giving you a credit score.
Beside of these important credit scoring models, each of the three national consumer credit bureaus offers its own proprietary credit scores. Given these scores aren’t very used for lenders to decide to give credit or not, they are often called “educational scores”.
Having a low credit score can hurt your financial life. Obviously, you can gradually raise your credit scores by paying your credit card balances in full on time, reducing your credit utilization ratio and keeping your accounts opened. This is the right time to work on generating an excellent credit score for a strong financial life. Whether you have recently started your credit life, have a wide credit history or just are planning to start building or rebuild your credit; you can count on Prestigio Jewelers to help you build excellent credit. We have helped thousands to build and rebuild credit for decades, and we can guarantee your credit approval. Apply now!