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. However, when considering the typical individual, only a handful really matter. In light of that, we will examine five credit scores that are considered crucial from a consumer point of view.
1. Credit score
Your FICO score (or, more accurately, your FICO 8 score) is the gold standard among credit ratings. 90% of the best lenders use this score to decide whether to grant you credit or not. That means this is the score the lender will probably look at when you apply for a new credit card, mortgage, car loan, personal loan, or anything similar.
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. Your ability to obtain fresh credit when needed is directly proportional to your credit score. A higher score makes you a more desirable borrower.
The three main credit reporting agencies—Equifax, Experian, and TransUnion—are responsible for compiling FICO ratings. Credit scores are based on FICO, but lenders may vary. Lenders may be exempt from reporting certain accounts to certain bureaus, which might lead to an inaccurate picture of your credit history. Additionally, an inaccuracy with one bureau could affect your score, but not with the others.
2. Our StrengthScore
Another all-encompassing credit score is VantageScore, whose most popular version is VantageScore 3.0. It resembles FICO to some extent. 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 still plays a role in some personal loans, mortgages, and auto loans, but its primary use is in credit card decisions. Each credit bureau has a unique credit history, so your VantageScore may vary.
Its range, similar to that of FICO, is 300 to 850. A better score indicates that lenders view you in a more favorable light. Although the range remains the same, your score’s calculation method has changed. It all depends on your circumstances, but VantageScore gives greater weight to your payment history and amount owed than FICO.
3. Mortgage Ratings from FICO
Mortgage lenders are not required to use your standard FICO score when evaluating your application. Instead, they may utilize a customized FICO score for assessing mortgage risk. For conforming loans, obtaining your FICO score is practically mandatory; therefore, this is particularly relevant for those.
For mortgages, there is a separate FICO score from each bank. The Experian FICO Risk Model v2, which is another name for the FICO 2, is one option. 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.
These FICO scores are based on updated scoring models that give more weight to certain aspects of your credit report. For instance, they might give your prior mortgages and other collateralized installment loans extra consideration.
4. Auto-scoring 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 class has a number of variations. All three of these bureaus use FICO Auto Score 8 and FICO Auto Score 9. Equifax uses FICO Auto Score 5, TransUnion uses FICO Auto Score 2, and Experian uses FICO Auto Score 4.
Again, lenders use these FICO ratings to evaluate your creditworthiness for 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. Credit reports from FICO
The last thing you need is a FICO bankcard score. Financial institutions tailor them to consider the specific aspects of your credit report that hold the most importance. Therefore, while evaluating your application, they will likely look more closely at your credit card history than at your personal or collateralized loan history.
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.
Steps to Keep Your Credit Ratings High
The majority of consumers often only view their FICO 8 or VantageScore 3.0 scores semi-regularly. Most of the time, consumers can view their FICO 8 or VantageScore 3.0 scores for free through certain credit-related applications or by contacting their current credit card company or lender.
The other parts of your credit reports are usually only visible under certain circumstances. Once a lender makes a decision based on your credit report, you may have access to it. Aside from that, there are bureau-specific reports and myFICO, both of which usually cost money. Thankfully, oftentimes, it isn’t required to pay for them.
For individuals with a solid credit history, the basic FICO score is usually a favorable indicator of where the other scores fall. Boosting those specialist scores, however, is quite similar to boosting your VantageScore 3.0 or FICO score, so don’t let a few setbacks discourage you.
Responsible credit usage is the foundation of a solid credit history. It is critical to maintain a low revolving credit utilization ratio in addition to completing payments on schedule. Low credit utilization and on-time payments significantly influence your future access to a variety of loan products, making them the two most crucial actions you can take to enhance your credit score.
Keep in mind that it’s not always necessary to open fresh credit accounts. Aside from the negative impact on your borrowing potential, this strategy also reduces the average age of your accounts and could result in an excessive number of accounts, which is cause for concern.
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.
