Do you know what your credit score is? It’s a piece of information related to your viability to receive a loan or a credit card, but it’s not always as cut and dry as a single number. Because there are different ways to determine an individual’s credit score, some sources or agencies will often have a different metric for the same individual.
More or less your credit scores are a figure that filters your previous credit history into a single number which allows banks and other lenders to determine the risk of providing you a loan. The most common way of getting an estimated credit score is your FICO Score and also your VantageScore. Here we’ll look at the specific differences between these two metrics and what those may mean to your pursuit of credit score perfection.
So, What Exactly Is A Credit Score?
“Credit Score” is a broad term used under the umbrella of the various methods to produce a 3 digit number. That range is from 300 (lowest) to 850 (highest) and your credit score will fall somewhere in this range. If you have a high credit score you are more likely to be approved for a credit card or bank loan and also have higher limits with improved interest rates.
There are 3 major credit bureaus: Experian, Equifax, and TransUnion. Details regarding the debt you hold – such as total debt, payment history, unused available credit, and different credit accounts you’ve opened – are provided to these agencies. They then compile the information so that lenders can see your credit history prior to approval or denial of a loan.
Credit card companies or banks will query these agencies to get a report on your personal credit data. Your details are run through an algorithm that then determines your 3 digit credit score based on all of that information compiled by the 3 agencies. It should be noted that the three agencies use your data differently and for that reason, you could have a slightly different credit score from each one of them.
What Is A FICO Score?
The FICO credit model is the most well known and commonly used credit score rating and is usually ranged from 350 (bad credit) to 850 (outstanding credit). The FICO credit score model was developed by the Fair Isaac Corporation and began being used by Freddie Mac and Fannie Mae (major USA mortgage and loan companies) in 1995.
There isn’t just one FICO score though, there are actually multiple variations. The most commonly used one by lenders is the FICO8 (introduced in 2009) which contains the broadest level of information and is, therefore, use widely by lenders. Other FICO score variations depend on what they will be used for. There is the FICO Auto Score for auto loans, FICO Bankcard Score for credit cards, and so on and so forth.
What Are the FICO8 Ranges?
- 350-579: Very Bad/Poor Credit
- 580-669: Descent/Fair Credit
- 670-739: Good Credit
- 740-799: Very Good Credit
- 800-850: Outstanding Credit
The FICO formula is kept highly secretive and only general information is available regarding the breakdown of any credit score. We do, however, know the general breakdown of weight given to the different areas regarding an individual’s loans and used/unused credit.
Metrics That Determine FICO8
- Credit Mixture (10%)
- New Credit/Available Credit (10%)
- Length Of Credit History (15%)
- Dollar Amounts Owed (30%)
- Payment History (35%)
“Where Do I Get My FICO Score?”
You can get your FICO score in a number of ways. If you have a credit card through certain banks you can get your FICO score on your monthly statement. Banks like Citibank, Discover, Bank of America and others do this for their clients every month for free. Or you can go to http://freecreditscore.com and get your free FICO score from Experian. It’s good to at the very least know your credit even if you’re not planning on using it right away. *Keep in mind that your Experian FICO score is one number and that the other 2 bureaus may have a different figure*
What Is VantageScore?
This is the other widely used credit rating system (one created by the actual credit bureaus) and is an alternative to the FICO model. It is similar to FICO in its scoring ranges, again from 300 to 850 and there are also multiple different versions lenders use. The most commonly used right now is the VantageScore 3.0.
The most notable difference between the VantageScore and FICO is that there are no set time frames like the FICO score. This means that if your credit history is as small as a single month you can still get a score. FICO, on the other hand, requires six months of data and information before their algorithm will come up with a figure regarding your credit level.
Here are the VantageScore 3.0 ranges (slightly different than FICO):
- 300-630: Poor/Bad Credit
- 630-690: Fair Credit
- 690-720: Good Credit
- 720-850: Exceptional Credit
The breakdown of the importance of factors for the VantageScore 3.0 components:
- Available Credit (3%)
- Recent Credit (5%)
- Balances/Amount Owed (11%)
- Utilization (20%)
- Depth of Credit: (21%)
- Payment History (40%)
Once again Payment History is the most important factor. This means that you should really prioritize paying your credit/loan bills on time. Missed payments or late payment can adversely affect your credit score greater than some other aspects, so be sure to make those payments consistently on time.
“Where Do I Get My VantageScore?”
Just like FICO you have a few options when it comes to getting your VantageScore. Many banks and financial institutions will provide you your credit score monthly for free. AmericanExpress and Chase Bank both provide Vantage 3.0.
“Should I Get Both Credit Scores?”
Despite the similarities of the two credit rating systems, they can differ by up to 100 points. So knowing the two numbers can help you in terms of getting approval if you know which score the lender in question your applying to uses or gives more weight to. As long as you know your scores and how they are broken down you can make the most of your current credit and keep that number moving in the right direction towards 850.