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Credit Scores - What are the types and why do they vary?

Posted on: 08th Apr, 2004 11:30 pm
A credit score is a 3 digit number that tells a creditor how creditworthy you are and how likely it is that you'll repay the credit once it is extended to you. These scores affect the interest rates you receive on mortgages, auto loans, credit cards, etc. In addition, when you go for an insurance policy or apply for a job, the insurer or employer may look at your credit scores. Even when you're looking to rent, your landlord would prefer it if you have a good credit/FICO score.

What is FICO score?

A FICO score is calculated on the basis of the FICO Scoring Model developed by the Fair Isaac Corporation. In most cases, when people talk about their credit scores, their FICO credit score is what they mean. Consumers can access different versions of the FICO score at the 2 bureaus - Equifax and TransUnion. These scores are known as the Beacon score and Empirica score.

Consumer FICO scores calculated by Experian are sold to lenders only and consumers can't access them. However, consumers can find their credit scores (based on Experian data) online at Experian. They can even request a free credit report from Experian, just like from other bureaus.

What is a good credit score?

Usually FICO credit scores range from 300 to 850. The higher your score is, the lower the risk to the creditor is when offering you a loan. A FICO score equal to or above 700 is considered a good credit score which will qualify you for some of the best deals at affordable rates.

What is a credit score chart?

A score chart helps you get an idea of credit score ratings based on the credit scores you have. The credit score chart is given below:
  • 730+ - Excellent
  • 700 - 729 - Good
  • 670 - 699 - Needs a closer look
  • 585 - 699 - Higher risk
  • Below 585 - Limited credit history

Can you get a free credit score?

Under the Fair Credit Reporting Act (FCRA), anyone is entitled to a free copy of their credit report once a year from each of the bureaus; but free credit scores are not available. You'll have to place an order with the bureaus and pay a fee (set by the Federal Trade Commission) if you'd like to get your credit score. You may apply for your credit scores online at www.annualcreditreport.com or contact them at their toll free number 877-322-8228.

What is the Credit Scoring system?

It's a system where the credit bureaus figure out your scores based on the information that is available from your credit report. The bureaus use a statistical program to compare the loan repayment history of consumers with similar profiles. Then they award points for each item that helps find the consumers who can easily pay down a debt. The total number of points adds up to your credit score.

Why do credit scores or FICO scores vary?

The major credit bureaus - Equifax, and Trans Union follow the FICO scoring model (developed by Fair Issac Corporation) to calculate a FICO score. But scores differ because they use minor variations in the FICO Scoring Model as well as assign different points to each item on your credit report.

Not all lenders/creditors and collection agencies will report your credit information to the same credit bureau. Therefore, the credit score you get from one bureau may differ from what you receive from another. In addition, your credit scores changes from time to time based on your credit transactions. So, make sure that your creditors update the bureaus with your latest credit details.

Do credit score ratings differ?

Credit ratings may vary from one lender/creditor to another depending upon the items (such as late payments on revolving accounts, mortgages, credit card balances,) they consider after reviewing your credit report. For instance, an auto loan provider may leave out an item that a mortgage lender would consider while providing credit score ratings.

Is Mortgage Credit score similar to the regular score?

Mortgage lenders consider the median score - the one that comes in between the maximum and minimum scores you receive from the bureaus. But often lenders may not use the median score in order to evaluate your creditworthiness because the credit report you pull from the bureau is based on the Consumer Model, where your lender may prefer to calculate the score using a different scoring system - the Mortgage Model.

The information used for both Models may be the same but the importance given to each tradeline account may vary. The Mortgage Model gives more emphasis to the tradelines that can affect your mortgage loan. Thus, your chances of getting a mortgage at a favorable interest rate may depend more upon your mortgage credit scores instead of your regular score.

Are there alternatives to FICO scores?

Apart from the FICO Scores, there are Alternative scores developed for consumers with poor credit. The Alternative scores are based on your payment history, outstanding loan balances, the type of credit accounts you have, and other factors.

As lenders pull your credit report from different bureaus, every lender will probably show different scores. Therefore, you won't get the same offers from different lenders. To avoid these discrepancies, the Vantage score has been introduced. A Vantage score ranges from 501 to 990 and is calculated the same way by each bureau thus giving you the same credit score, provided similar information is reported to each bureau

With the increase in the number of consumers who find themselves delinquent on their bills, lending standards have gotten tighter. Therefore, qualifying for a loan has become harder, especially if you don't have a good credit report or score. Especially when it comes to getting a mortgage, even those that are not supposed to be score driven require you to have a minimum 580 credit score. So, it's important to protect your credit standing and maintain a good score.

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I agree but I also think they get ruthless people in their offices too. Life is full of those people and when everything is going well it is easy to deal with them but when your down and out it sure doesn't help. I don't like dealing with most of these people. Hopefully everyone keeps good records becasuse I have heard of junk collectors trying to recollect on a paid debt.
Posted on: 15th Jul, 2008 04:48 am
I cashed out a little while back. why is my money showing in the negative?
Posted on: 15th Jul, 2008 04:51 am
We now have a late on our our mortgage. How will this effect our credit score and will our credit card company's raise our rate because of this?
Posted on: 08th Nov, 2008 12:42 pm
Hi noname,

If a late payment is reported by the lender to the credit bureaus, then it will affect your credit score by about 50 points. If it is not reported, then you don't have to worry.

Thanks.
Posted on: 11th Nov, 2008 02:40 am
i have recently applied for a job as a self employed loan collector what will they look for in my credit score
Posted on: 07th Dec, 2008 10:18 am
Hi peabrain,

If you want to take a loan, the lender will look not only at your credit score but your entire credit history. If you have a credit score in the 700's, it will be easier for you to get a loan. Apart from this, the lender will also look into your credit report. If your credit report has late payments, collections or unpaid liens, it will become difficult for you to get a loan. If there is no adverse information on your credit report, getting a loan will be easier for you.

Thanks,

Jerry
Posted on: 08th Dec, 2008 12:48 am
Do you see the Vantage scoring model replacing the FICO model any time soon?
Posted on: 05th Jan, 2009 12:09 am
The FICO score will prevail for some more time. I don't think the new Vantage Score model will replace the FICO score so easily. Moreover the lenders and the borrowers will get confused with the sudden introduction of the VantageScore.
Posted on: 05th Jan, 2009 11:25 pm
I have a very low score with 1 foreclosure and 1 120 day past due credit card. If I get either cought up how quickly and how much will my score rise
Posted on: 22nd Feb, 2009 05:12 pm
Hi Guest,

It will take some time to improve your credit score. Though you catch up on your payments, the credit score will not improve immediately.

Thanks
Posted on: 22nd Feb, 2009 09:31 pm
"Well, I would not think that it would be a very enjoyable job, can you imagine going to work everyday, doing a job that you have to call people everyday and get on them about past debt. You would hear all types of stories, from people who do not genuinely feel they owe the debt or those who know they owe it and chose not to pay it. I think that dealing with people who owe debt would be a heart wretching and/or frustrating experience, just a job that I would not want to do. I guess someone has to do it, thank god it is not me."


but i suppose there are some people who do have a will to pay back the amount they owe but due to adverse conditions they are lacking behind.In this condition i would really like to help it out for those guys.

I have a really good experience with those who have a genuine desire to pay back the money they owe.

One lady had taken $ 500 from me.I followed it for some time, but i could not get the money as she was not having anything.I had helped her without a second thought for her child's education fee.She remembered that.After 3 yrs she called me on her own and then paid my principle.

I was shocked to know that still she had remembered the debt she owed.So when you see the sincere attempt you surely get the conviction that one must help those who are really going through the tough situation.

i have purposely not mentioned anything about scammers because they are not worth discussing. :!:
Posted on: 11th Mar, 2009 05:23 am
What does the ratings of R, M, or I with numerical numbers (i.e., 1, 2, etc.) mean? I. e. numerical numbers from 1, 2, etc.)
Posted on: 13th May, 2009 05:41 am
Hi Marilyn!

Welcome to the forums!

As far as I know, O refers to open; R refers to revolving and I refers to installment in your credit report.

Sussane
Posted on: 13th May, 2009 09:50 pm
marilyn, O does refer to open-ended type of credit - one in which you have a balance due that must be paid in full once you are billed. sussane hit the spot with the other identifications.

as for the numerical portion...1 means you are paying on-time, in an as agreed fashion; 2 reflects 30-days late; 3 is 60 days late; 4 90 days late; 5 is 120 or more days late; 8 is a repossession or foreclosure action; and 9 is a collection/charge off.
Posted on: 14th May, 2009 10:13 am
i have just recently been discharged from a chapter 7 bankruptcy. prior to filing, i had a credit score of 585, roughly how many points did that decrease in my score? also, before filing and during the time i was in chapter 7 i was/am making on time monthly payments on my student loan, did that have a positive impact on my score? i have made some bad financial decisions in the past and now i’m getting a fresh start to rebuild my credit. i just want to know where i stand on my road to financial recovery!
Posted on: 22nd May, 2009 09:13 am
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