Compare Mortgage Quotes

Refinance Rates for Today

Please enable JavaScript for the best experience.

In the mean time, check out our refinance rates!

Company Loan Type APR Est. Pmt.

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.

Related Articles
Related Discussions
Yeah, that makes sense.
Posted on: 13th Jan, 2012 01:09 pm
I agree there is no scale which can judge your credit score. But in general terms we cab categorize it as.

730+ - Excellent
700 - 729 - Good
670 - 699 - Needs a closer look
585 - 699 - Higher risk
Below 585 - Limited credit history
Posted on: 07th Jul, 2012 03:38 am
Thanks for sharing this, Guest!! :)
Posted on: 09th Jul, 2012 12:41 am
For additional information, Here are the 3 types of credit scores:

1. Plus score - scores ranging from 330 to 830, is a user-friendly credit score model developed by Experian to help you see and understand how lenders view your credit worthiness. It is not used by lenders, but it is indicative of your overall credit risk. Higher scores represent a greater likelihood that you’ll pay back your debts so you are viewed as being a lower credit risk to lenders. A lower score indicates to lenders that you may be a higher credit risk.

2. Vantage Score - VantageScore leverages the collective experience of industry leading experts on credit data, credit risk modeling and analytics. The nation's three major Credit Reporting Agencies (CRAs) - Equifax, Experian and TransUnion - worked together to develop a generic credit scoring model that is regularly revalidated. VantageScore marks the first time that the three companies joined forces to produce a model that scores consumers consistently across all three companies.

VantageScore is used by numerous lenders, making billions of decisions annually, including:

4 of the Top 5 Financial Institutions
5 of the Top 5 Credit Card Issuers
2 of the Top 5 Auto Lenders

3. FICO Score - The Fair Isaac Corporation (FICO for short) is a leading distributer of credit scores. FICO offers multiple different score calculations, rather than one single version. FICO Score Calculations include BEACON®, FICO® Risk Score, Classic, 8.0, and industry-specific score calculations for auto lenders and credit card companies.
Posted on: 27th Dec, 2012 12:16 am
Thanks for the info!! :) Your scores are quite informative... Hope to see you more in the forums giving such informative answers and helping the community members.
Posted on: 27th Dec, 2012 08:49 pm
The different Credit scores namely; FICO score, Experian, Equifax, and TransUnion credit scores and VantageScore.

FICO score the longest standing and most widely recognized. It is the credit score most likely used by lenders. That said, there can even be variations of the FICO score, including a FICO score from each of the three major credit bureaus, as well as variations on the FICO score depending on the purpose of your loan.

Experian, Equifax, and TransUnion credit scores. The three major credit bureaus in the US actively maintain credit records for virtually everyone in the US. If you have a credit history, they probably have a record on you.

VantageScore is a new credit scoring model created by America's three major credit reporting agencies to support a consistent and accurate approach to credit scoring. This score provides lenders with nearly identical risk assessment across all three credit reporting companies.

These 3 credit scores vary first mainly in source. Each of the major credit bureaus maintains its own records on your credit profile. These records can vary from credit bureau to credit bureau. In addition, the credit scores also vary is because the scoring agency may use a slightly different system to determine your score. So even if the data they have is the same as another agency, the way the information is weighted may affect your score.
Posted on: 28th Jan, 2013 11:01 pm
Page loaded in 0.265 seconds.