Did you know that there are hundreds of credit scoring models being used today?
With different lenders creating different credit score models based on their own credit criteria, it is very possible that you could have a hundred credit scores. While it is impossible to obtain or keep track of all your credit scores, you should be aware of the models most used by lenders.
The FICO score is the most commonly used credit score when applying for credit or a loan. FICO is an abbreviation for Fair Isaac Corporation, the first company ever to offer credit scores. You have different FICO scores at each of the three major credit bureaus â€” Equifax, TransUnion and Experian. Your FICO Score ranges from 300 to 850, and is based on several factors:
However, the FICO model is not as simple as the above breakdown may seem. FICO often makes changes to its credit score model to make it a better reflection of how creditworthy individuals are. As a result, there are currently more than 50 FICO credit score models that are used for different types of debt. A different version of your FICO credit score is used for a mortgage, auto loan, credit card and more.
The latest version of the FICO score is FICO 9, which allows unpaid medical bills to carry a lower weight than other unpaid debts, disregards collections accounts that have been paid off in full and factors in rent payments that are reported.
FICO 9 was developed because unpaid medical debt may not be an indicator of financial health, as an individual may be waiting on insurance payments before paying the debt, or may not even know a bill has been sent to collections.
FICO score 8 is still the most commonly used by lenders. This model does not allow for the lower weighting of medical debt.
Consumers should also be aware of the newly launched UltraFICO Score. This score is the result of a partnership by FICO, Experian and data aggregator Finicity. The key difference between it and other FICO scoring models is that it allows bank account transactions to be factored into the final score. This is a score for which consumers will have to opt in by linking their deposit accounts to their credit profiles. This can help consumers with a sparse credit history to boost their scores based on their banking behavior, which includes a history of positive account balances, frequency of bank transactions, length of time the accounts have been open and evidence of consistent cash on hand.
As this is a very new feature, there will be a slow rollout of availability. You can sign up here to receive news and updates on the UltraFICO score.
VantageScore is the main FICO credit score competitor, and in a similar manner, the VantageScore is constantly evolving to portray a more accurate picture of a personâ€™s financial health. It was developed by the three major credit bureaus. While still not as widely used as the FICO score, an October 2018 study by consulting firm Oliver Wyman found the use of VantageScore rose over 20% year over year, and was up more than 300% over the past five years. Like the FICO score, VantageScore has a scale of 300-850.
The most recent version is VantageScore 4.0. As is the case with FICO score 9, VantageScore 4.0 puts a lower weight on unpaid medical debt (medical debt less than six months old is completely disregarded). Both VantageScore 3.0 and 4.0 exclude paid collections from their model.
While VantageScore 4.0 debuted in 2017, 3.0 is still the most widely used model. The score takes the following factors into consideration:
MagnifyMoneyâ€™s parent company, LendingTree, offers a free credit monitoring service that uses the VantageScore 3.0 model.
It used to be pretty difficult to obtain your credit score across all three bureaus for free. Now, several financial institutions offer consumers the chance to obtain their FICO scores at no cost. Here is a sampling of banks and credit unions that offer this service:
For Experian: If you have an American Express card, a Chase Slate account, or a credit card with Wells Fargo or the First National Bank of Omaha, you can get your FICO score from Experian. Discover offers an even better service, as anyone can sign up to view their Experian score at Creditscorecard.com, even if they do not have an account with Discover.
For Equifax: If you have a Citibank card, or an account with DCU Credit Union or PenFed, you can access your Equifax score for free. Keep in mind that Citibank uses a scoring model from 250 to 900 based on Equifax and the FICO Bankcard Score 8 model, which emphasizes credit card behavior.
For TransUnion: If you have a Barclays card, select credit cards with Bank of America or a Walmart Credit Card, Walmart MasterCard, or Samâ€™s Club Credit Card, you can access your TransUnion score.
The credit scoring system has a long way to go before it becomes transparent and accessible. Currently, it is up to lenders to use a national score, like the FICO score, their own internal credit score, or a mix of the two.
While it would be impossible to monitor all of your credit scores, there are ways to monitor the most important factors in every score. Itâ€™s your right to get annual access to a free copy of your credit report from each of the three bureaus. You can do this at annualcreditreport.com.
Even though no lender uses the same credit score model, all scores look at the same basic information, so taking steps to build and keep strong credit will benefit you no matter which score is being used.