There is nothing worse than applying for credit, thinking that you are above the lender's minimum credit score requirement and then finding out that your score is not what you thought it was (even though you pulled your credit report yesterday)!
If you find yourself in this situation, you may be drawing a direct comparison between entirely different credit scoring brands. To know where you stand amongst these varying scoring models and ensure that you understand the difference between them is important before you apply for credit.
Your FICO score is the most widely used credit score amongst lenders. FICO stands for Fair Isaac Corporation, which refers to the company that created a method of risk assessment for ‘credit worthiness' by weighing different factors and assigning you a number on a scale that corresponds with your level of risk (credit score). A FICO score ranges from 300 to 850. The lower your score is, the ‘riskier' you will be perceived by lenders. Many different aspects of your credit history are taken into account when calculating your FICO score; each area of your history is weighed differently (See FICO pie chart below).
Source: www.myfico.com
While most lenders rely on FICO scores to properly assess risk, a new scoring model called VantageScore has been gaining momentum. VantageScore was created by the three major credit bureaus as an alternative to the FICO score. VantageScore credit scores run on a scale of 510 to 990 and offer a corresponding letter grade. VantageScore takes into account multiple aspects of your credit history, but weighs them differently than a FICO score does (See VantageScore pie chart below).
Your VantageScore Consists of:
Source: www.VantageScore.com
While both methods of scoring assess risk in a fairly consistent way, it is important to know which score you are using to monitor your credit.
Keep in mind that VantageScore has a different range than a FICO score! You may be confused upon seeing that you have a 700 VantageScore and then finding out from a lender that you were denied credit because your FICO score was 580.
While some banks and credit card companies may offer you a credit monitoring system based on the VantageScore model, keep in mind that the FICO is still the most prominently used scoring model amongst lenders!
For more information about FICO scores you can visit www.myFICO.com . If you are interested in learning more about VantageScore you can visit www.vantagescore.com.
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