People often use credit ratings in a specific context, keeping a specific score in mind. However, in reality, credit ratings come in a multitude of varieties. General ones examine your credit in a broad sense, while specific ones focus on specific loans or financial decisions.
For the average buyer, keeping track of all of them isn’t necessary—or even feasible. In reality, though, for the typical individual, only a handful really matter. So, with that in mind, I’ll be looking at the five most important credit scores from a consumer standpoint.
1. Credit scores
A person’s FICO score, or more precisely, their FICO 8 score, is the most basic and crucial credit score. 90% of the best lenders use this score. Lenders will most likely look at this score when they evaluate your application for a new credit card, mortgage, auto loan, personal loan, or similar product.
Fair Isaac Corporation’s FICO credit score has been the standard for many years. The system is based on a scale from 300 to 850, with 850 being the maximum achievable score. If you want to make it easier to get fresh credit when you need it, raising your score is a beneficial place to start.
Equifax, Experian, and TransUnion are the three main credit reporting agencies that work together to create FICO ratings. Credit scores are based on FICO, but lenders may vary. In some instances, your credit report may appear different than it actually is because lenders aren’t required to disclose your accounts to every bureau. Furthermore, an inaccuracy with one bureau could affect your score, but not with the others.
2. The VantageScore
Another comprehensive score is VantageScore, the most used version of which is VantageScore 3.0. It’s not completely dissimilar from FICO. The three credit reporting agencies, however, came up with this one. Additionally, lenders may not use it as frequently. Only 29 of the top credit unions use VantageScore, compared to nine of the top ten banks.
VantageScore may still influence the approval of certain personal loans, mortgages, and auto loans, despite its most common use in credit card selections. Your credit history is unique to each bureau, so your VantageScore may be different as well.
It follows the same 300–850 range as FICO. Lenders will see you in a more favorable light if your score is high. While the range remains unchanged, the method used to determine your score has changed. Unlike FICO, VantageScore considers your payment history and total debt more heavily; this could be good or detrimental for you, depending on your circumstances.
3. Credit reports from FICO
Mortgage lenders may not use your standard FICO score when you apply for a loan. Instead, they might utilize a customized FICO score for mortgage risk assessment. This is particularly the case with conforming loans, where obtaining a FICO score is practically mandatory.
A FICO mortgage score is exclusive to one bureau. FICO 2 is the second iteration of the Experian FICO Risk Model. Furthermore, if your lender prefers one of the credit reporting agencies, factors such as the TransUnion FICO Risk Score 4 or the Equifax Score 5 may be considered.
Based on updated scoring models, these new FICO scores place more emphasis on specific aspects of your credit report. For instance, they might give your prior mortgages and other collateralized installment loans extra consideration.
4. Scores from FICO
Specialist credit ratings for vehicle loans are based on a slightly tweaked version of the FICO model, similar to those for mortgages. This category contains multiple versions. All three bureaus use the FICO Auto Score 8 and the FICO Auto Score 9. Equifax uses FICO Auto Score 5, TransUnion uses FICO Auto Score 2, and Experian uses FICO Auto Score 4.
To reiterate, the purpose of these FICO ratings is to determine your financial risk, specifically in relation to vehicle loans. As a result, they prioritize aspects of your credit report that are relevant to this situation, such as your actions with respect to vehicle loans.
5. Scores for FICO Bankcards
The final stage involves presenting FICO Bankcard Scores. Financial institutions tailor these scores to prioritize specific aspects of your credit report. Consequently, they tend to prioritize credit card-related information over personal or collateralized loan histories.
All three credit reporting agencies utilize the same FICO Bankcard Scores (8 and 9). Equifax and TransUnion both provide FICO Bankcard Scores 5, whereas Experian additionally offers FICO Scores 2 and 3.
Methods for Keeping Your Credit Ratings Stable
Customers frequently only view their FICO 8 or VantageScore 3.0 scores on a semi-regular basis. Those are the ones that are typically available for free through their current credit card company or another lender, as well as through specific credit applications.
Only in certain cases will you be able to see the rest of your credit ratings. Once a lender has made a decision based on one of your credit ratings, you may be able to view the others. However, bureau or myFICO reports can be purchased. Thankfully, you won’t always have to shell out cash for those.
For individuals with a solid credit history, the basic FICO score is usually a favorable indicator of where the other scores fall. But even with a few bumps along the road, raising those specialist scores is just as simple as raising your VantageScore 3.0 or FICO score.
Using credit responsibly is the first step in building a solid credit history. It is critical to maintain a low revolving credit utilization ratio in addition to completing payments on schedule. Maintaining a low credit utilization ratio and a history of on-time payments is a tried-and-true piece of advice for managing your credit cards. These factors greatly influence your future access to a variety of lending products and services.
Also, don’t open new credit accounts until absolutely necessary. Additionally, it could lead to a large total number of accounts, which is concerning, and it could decrease the average age of your accounts, both of which might work against you by boosting your borrowing capacity.
If you manage your credit responsibly, your scores can either increase or maintain their current high level. Therefore, if you make excellent decisions, you may be able to raise your ratings generally.
