Your credit score is a three-digit number that lenders use to assess your credit risk. It is based on information in your credit report, which includes your payment history, credit utilization, length of credit history, and other factors.
While there is no single “correct” credit score, it is important to understand that the source of your credit report can impact the scores you encounter. This is because there are various credit scoring models used to calculate scores, depending on the purpose for obtaining the score.
For example, when applying for a mortgage, the credit score generated may differ from that of an auto or credit card application. This is because different scoring models are used for different types of loans, and each model emphasizes different factors within your credit profile.
Here is a brief overview of some of the most common credit scoring models:
- FICO: FICO is the most widely used credit scoring model in the United States. There are several different versions of the FICO score, each of which is designed for a specific type of loan.
- VantageScore: VantageScore is a newer credit scoring model that is gaining popularity. There are two versions of the VantageScore, each of which is designed for a specific type of loan.
- Equifax Beacon: Equifax Beacon is a credit scoring model that is used by Equifax, one of the three major credit bureaus.
- Experian TrueScore: Experian TrueScore is a credit scoring model that is used by Experian, another of the three major credit bureaus.
As you can see, there are a variety of different credit scoring models in use. This means that your credit score could vary depending on the source of your credit report.
So, what does this mean for you? It means that it is important to be aware of the different credit scoring models and how they can impact your overall creditworthiness. If you are applying for a loan, it is a good idea to get your credit score from multiple sources so that you can see how it is calculated.
You can get your credit score for free from each of the three major credit bureaus once per year. You can also get your credit score from many other websites and services. Once you have your credit score, you can use it to track your progress over time and to make sure that you are taking steps to improve your credit.
Here are some tips for improving your credit score:
- Make all of your payments on time.
- Keep your credit utilization low.
- Pay down your debt.
- Increase the length of your credit history.
- Open new credit accounts responsibly.
By following these tips, you can improve your credit score and increase your chances of getting approved for loans and other forms of credit.
Your credit score is an important factor in your financial life. By understanding the different credit scoring models and how they can impact your score, you can take steps to improve your creditworthiness and achieve your financial goals.
If you would like in depth information on understanding your credit score here is a link to the book written and published by the author: UNDERSTANDING YOUR CREDIT SCORE by TIM SANDERS