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FICO® and VantageScore are the most commonly used models used by the major credit bureaus—Experian, Equifax and Trans Union. Although Experian also has its own scoring model called Experian PLUS, it’s good to know other models exist. Here’s a look at some of the other scoring models and the ranges they use. 

• VantageScore Versions 1.0 and 2.0:   501–990
• Experian’s PLUS Score:   330–830
• TransUnion New Account Score of:   300–850
• Equifax Credit Score:   280–850

Some lenders even have their own models, but most lenders and credit card companies use FICO® scores or VantageScore scores. Learn more about how VantageScore scores compare to FICO® scores. 

Hello, Please Tell Me What Credit Scores Really Mean?

Credit Scores are three-digit numbers that rank you as to your creditworthiness. How the scoring models break down your credit scores is a bit of a mystery, but the number is calculated based on the information in your credit report at a credit bureau. Each bureau has its own file and score based off different criteria. The file is a picture of how you’ve used credit—or not. The score is updated regularly. Your specific score and where it falls tells lenders and credit card issuers how likely—or unlikely—you are to pay off a loan or credit card. This number also indicates how likely you are to miss payments or default. In other words, it tells them if you’re a good risk or not and whether or not they want to approve or deny you for a loan or credit card. This number, right or wrong controls your future lending abilities.

How about a poorer score?

A poorer score doesn’t necessarily mean the lender or credit card issuer won’t give you a loan or card, but it can mean, they do so at a higher interest rate and poorer loan terms which sucks. In other words, to offset you being a risk, they offset their risk by charging you more interest or higher annual fees! A simple example; consider that buying a $400,000 house with a 30-year fixed mortgage, and you have good credit, you can end up paying more than $98,000 for that house over the life of the loan if you had bad credit.  

Any given lender or credit card company might have its own definition of a good credit score too. For example, one lender might approve applicants with credit scores of 670 or higher for a loan. Another might be more selective and only accept those with scores of 720 or higher. Or both lenders might offer credit to anyone with a score of at least 650, but charge consumers with scores below 700 a higher interest rate. We agree it’s complicated when lenders make up the rules. Landlords also use scores, as well as cell phone companies, employers, and auto loans to determine whether or not to they want to do business with you.  

What Do Lenders Prefer?  A Good VantageScore Score Or A Good FICO® Credit Score? 

Lenders don’t necessarily prefer one score over the other. In fact, it’s likely a given lender uses one score and not the other. FICO® reports that 90% of lenders use FICO® scores when deciding whether or not to loan money to an applicant. VantageScore, on the other hand, states that “About 10.5 billion VantageScores were used between July 2017 and June 2018, with 4.4 billion of those involving credit card issuers. This is according to a VantageScore Solutions market study released in 2018.” VantageScore also states that VantageScore is used by auto loan lenders, mortgage lenders, personal and installment loan lender and eight out of 10 of the largest banks.  VantageScore for lenders and consumers include the following model: 

• Was developed by all three credit bureaus to offer a model more consistent across all bureaus than the FICO® scoring model.
• Calculates scores for more people by giving a score to people with a shorter credit history.

And both models are consistent enough with each other that knowing where you stand in one, gives you a solid indication of your credit in general. 

Exactly What Goes Into a Good Credit Score? 

The same basic factors go into calculating both VantageScore credit scores and FICO® credit scores and are: 

• Payment History that accounts for 35% of most scores
• Credit Utilization that makes up 30% of most scores
• Length Of Credit History and Credit Age used to calculate 15% of most scores
• Mix Of Accounts that makes up 10% of most scores
• New Credit Inquiries that affects 10% of most scores

1. Payment History 

Pay your bills on time! A history of late and missed payments for either scoring model will kill your score. This factor alone lowers your credit score more than any other factor. When determining your score, both the FICO® and VantageScore scoring model looks at how recently you missed a payment or were late. The scoring model also looks at how many accounts were late on and how many total payments on each account were missing or late. The FICO® scoring model treats each late payment the same—assigning a single weight to all of them as a whole. The VantageScore model looks at each late payment separately, which means each late payment has an added impact on your score – YIKES! To have a good credit score, you want to have as clean a payment history as possible with few or no late payments. 

2. Credit Utilization Ratio

Don’t max out your credit cards! Your credit utilization ratio is the amount of credit you’ve used divided by your total available credit limit. If you have credit cards with a combined credit limit of $10,000 with balances of $3,000, your credit utilization ratio is 30%. Having a good credit score requires a credit utilization ratio of 30% or less and 10% is even better. To hit 10% with a combined credit limit of $10,000, your balances need to stay between $1,000 and $2,500. 

3. Credit Age

4. Account Mix

Account mix is how many installment accounts and revolving accounts you have. 

• Installment accounts are loans, such as mortgages, car loans or personal loans, with a fixed monthly payment for a certain term (number of months or years).
• Revolving accounts are credit cards and lines of credit with an overall credit limit that you can charge against.

Lenders want to see you can handle, and are familiar with, both types of accounts, so a good mix of the two makes for a better credit score. 

5. Credit Inquiries

Hard inquiries or “Hard Pull” is a ding on your credit, and it hurts. This occurs when a lender looks at your credit report because you’ve applied for credit. A hard inquiry affects your credit score negatively—lowering it by 5 to 10 points for up to 2 years. When shopping for an auto loan or mortgage, it’s normal to shop around to find the best rates. Depending on the scoring model used. If you do your loan shopping in a 14 to 45-day span, the inquiries can be lumped into a single inquiry hurts less, acting as only one Hard Pull, and affects your score less. FICO® score models allow 30 days, while others allow 45 days. On the other hand, the VantageScore model uses only a fourteen-day span. You can ask a lender which credit scoring model it uses when you apply for a loan.

*Important Credit Tidbit – The ability to lump hard inquiries together doesn’t apply to credit cards.

Soft inquiries also occur but don’t affect your credits score. While hard inquiries only make up 10% of your score, to maximize your score, try and minimize credit inquiries. 

Is a Credit Score the Only Thing Lenders Look at?

Do lenders look at more than credit scores? Sorry to say, but in my experience, that’s really all that matters. The score plays a large factor, but so does your full credit report—sometimes from one bureau, sometimes from all three. The rules in place are hard to change, and even though they may look at your annual income and your debt-to-income ratio or overall debt, your credit report remains the main make or break decision.

Your debt-to-income ratio is also considered and is calculated by dividing the total recurring monthly debt you have by your gross monthly income to determine the percentage of debt you have compared to your income or available money. – That was a mouth full.

You want the percentage of your debt-to-income ratio to be on the lower end. Otherwise, a lender may look at a high number and immediately think you’re unable to successfully make any more monthly payments and so consider you a higher credit risk. Credit card issuers and lenders may also look at how many reported delinquencies you have, how many hard inquiries were added to your credit file. Again, this is part of your credit report and credit score. This factors into your overall credit card utilization rate, your annual income, and the health of your credit history. 

How Do I Get My Accurate Credit Scores?

Easy, but credit scores and credit reports are two different things. You can get your credit score from a variety of providers, so include free trials and are online.  You can also get your full credit report from each credit bureau free once a year upon request directly by contacting the credit bureaus. Those reports don’t include your credit score. Knowing your score lets you know your credit rating and can help you determine what credit cards you are more likely to qualify for and what loans and mortgages you might get.

What If My Credit Score Is Less than Perfect or Just Plain Bad?

If your credit is fair or poor, find out why. You can always work to make it better.  You can see what’s impacting your score in your free Credit.ly report card. It shows how you’re fairing in payment history, debt usage, credit age, account mix, and credit inquiries. Find out what’s affecting your credit—whether one factor or multiple factors—you can address the factor and work to improve your score. 

Once you get to good credit, (faster than you think) you can keep it healthy by continuing to monitor the factors in your report card and taking the needed steps to keep your score healthy. Credit.ly offers free resources to help you understand more about how credit impacts your life. Check our Free Credit Resources page for more info. 

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