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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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Related Discussions
sorry, dante, but i don't know what a consumer score is, and it certainly won't relate to what a mortgage lender needs. do you have credit at all?
Posted on: 11th Oct, 2009 09:28 pm
When asked my fico score how do I determine this when reading my credit report? Do I average the 3 scores?
Posted on: 16th Jan, 2010 12:39 pm
Welcome auty,

You will not have to average the credit scores. You can simply read out the 3 individual scores as given to you by the bureaus.
Posted on: 17th Jan, 2010 11:36 pm
the score that is used in qualifying is the middle of the three scores. that is, if you had scores of 750, 700 and 650, your middle score is 700. throw out the high and the low - that's the standard.
Posted on: 18th Jan, 2010 08:25 pm
and if there are 2 borrowers the lender will use the lower of the 2 middle scores.
husband 700 750 650 (700 is middle)
wife 800 750 700 (750 is middle)

the lender will use 700 since that is the lower of the two scores (700,750)
Posted on: 22nd Jan, 2010 08:04 pm
Can credit scores be increase in two months?
Posted on: 02nd Feb, 2010 08:43 am
yes, if you have made serious inroads into balances, and if you've eliminated any collections/charge offs, etc. i don't think you'll find huge increases in such a short time, but the likelihood is that you'll see better as long as you've taken care of business and made progress.
Posted on: 02nd Feb, 2010 08:49 am
I have seen points increase as much as 90 points in 2weeks

You can't do this with regular credit history
You used to be able to when someone added you to their credit card but that doesnt happen anymore
The only way you can do that is by credit repair.
For example..
If you had a collection on your credit report....and it brought down your score by 50 points...then you had it removed.....then your score should go back up by 50 points. Now imagine removing multilple negative items
Posted on: 02nd Feb, 2010 09:01 am
I "M IN A LOW INCOME GROUP IWANT A 502 RURAL HOME LOAN DIRECT LOAN, THE ONLY THING I WORRY ABOUT IS MY CREDIT SCORE IS 520 ,AND I REALLY WANT A HOME OF MY OWN FOR MY AUTISTIC SON AND ME, I PAY $450.00 A MONTH FOR RENT WHY NOT USE IT ON A S :? IMPLE TWO BEDROOM HOME? :cry: :cry: KAREN
Posted on: 07th Feb, 2010 10:06 am
WHEN TRYING TO GET A LOAN THROUGH USDA LOW INCOME RURAL HOW INPORTANT IS A CREDIT SCORE WHEN YOU KNOW YOU ARE GOING TO PAY OFF THE HOME , I"M PAYING $450.00 MONTHLY ON THIS PLACE I"M IN AND IT"S ABOUT REALY TO BE KNOCKED DOWN OR A GOOD WIND WILL GET RID OF IT, NO HEAT NO ELECTRICITY IN ALL OF THE ROOMS, IT"S A MESS.
Posted on: 07th Feb, 2010 10:13 am
It's important...they look at the score among other things. You should have someone look at your credit to see if there's anything that can be fixed. Income is also a factor
Posted on: 07th Feb, 2010 10:49 am
What time of the month do credit scores post.
Posted on: 05th Mar, 2010 10:31 pm
they post instantly

as soon as their is something changed on your credit report...you can get a rescore pretty quick....i usually see them in minutes
Posted on: 06th Mar, 2010 10:13 am
Hi my credit is in a good condition but when i see my credit reports the numbers are different for my scores. why do they show up like this?
Posted on: 15th Mar, 2010 10:35 am
Hi my credit is in a good condition but when i see my credit reports the numbers are different for my scores. why do they show up like this?
Posted on: 15th Mar, 2010 10:35 am
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