What Are The Different Types Of Credit Scores In USA?

What Are The Different Types Of Credit Scores In USA?

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Credit rating is an indicator of creditors’ confidence level to every American. It identifies financial capabilities when it becomes necessary to obtain financing for the purchase of large things, such as a new car, or take a mortgage loan. Many people know about this and even have an idea about the level of their credit rating, but not all Americans know that there are different types of credit scores.

Some people think that they have only one credit rating, but in fact people have dozens of different types of credit scores that you might not have even heard of, but this does not cancel the responsibility.

Read on to find out what different types of credit scores there are.

What are credit scores?

Many of us have heard of credit bureaus who calculate our credit scores based on the information they receive from lenders. The most popular and common among them are Experian, TransUnion and Equifax. In a sense, this is true, but these are not the only bureaus and different types of credit scores that exist.

Each bureau uses VantageScore as software, but each has its own calculation method, so you can have different types of credit scores with the same data that they use.

Many credit cards provide their users regular free reports that are created using VantageScore. To compete with FICO, many lenders use this software to calculate your credit score. The assessment, created by Fair Isaac Corporation in 1989, is now accepted as the main credit rating, which most people perceive as the only credit rating. But even in one company there are different types of credit scores.

In addition to credit ratings of credit bureaus, there are also private assessments that can be used to inform consumers to understand the general condition, but will not be used by lenders when making lending decisions for a particular consumer.

FICO Score

Your FICO score is the most widely used since 1989 and is perhaps the most widely used lender when considering an application for a loan from each consumer. More than 90% of lenders use FICO data when making a decision on loan approval to borrowers.

How does the basic FICO score work? Different types of credit scores range from 300 to 850, which are divided into several ranges. You’ve probably heard expressions like good credit or bad credit. What exactly do these definitions mean? So, we will consider different types of credit scores according to FICO classification.

  • A credit score of 800 or higher is Exceptional credit and is quite rare.
  • From 740 to 799 points this is considered very good credit.
  • A credit score in the range of 670-739 refers to a good credit.

580-669 points is called a Fair credit, and everything that is below 579 points is a bad credit, which will make it very difficult to get approval of any loan on acceptable terms, except for those lenders who work with bad credit but offer tough conditions and high interest rates.

With an exceptional credit, as well as with a very good one, you will be welcome to any lenders, since you are considered the least risky borrower and the most reliable option for lenders. You will be able to get loans on the best conditions,  and lenders will be ready to finance the largest purchases.

Those people who have a credit score, below 669, will have a high chance of being refused a loan, or receive approval on fairly tough conditions, since you will be considered a risky borrower.

Credit bureaus, including FICO, determine your credit rating using the information they receive from lenders. If you allowed payment delays, your credit score will be lowered. The total amount of your debt and the ratio of credit limit to its use also have a direct impact on your credit rating. Among other things, the length of your credit history will also affect the size of your credit score.

In addition to FICO base points, there are different types of credit scores that matter and influence your credit, which is worth knowing.

Sectoral ratings

Your industry scores assess your creditworthiness based on a specific credit line. Most often they are used by lenders when you apply for a credit card or for a car purchase.

Industry-specific scores differ from baseline and have a range from 250 to 900 points. Despite the matter, these points can still be used as a base score range. In addition, you can get a mortgage score if you intend to buy a house over time.

Industry-specific-scores-differ-from-baseline
Industry-specific-scores-differ-from-baseline

Image source: https://pixy.org/5510/

VantageScore

VantageScore is a credit score calculation program that has been used since 2006 by the three most popular credit bureaus: TransUnion, Equifax and Experian. Initially, the VantageScore credit score was significantly different from the FICO scores, but the competition between credit bureaus forced the credit score range to match and now they have the same range from 300 to 850 credit scores.

If you are just starting your credit history, then VantageScore may be more loyal to you. For example, FICO requires that your credit line be at least six months and you have one account.

Also, the program, VantageScore can create an account for you with a very short credit history, even if it is only one month old. This is probably due to the fact that VantageScore will also take into account current payments, for example, rent, unlike FICO.

VantageScore takes into account such factors when calculating your credit score, which are used by FICO. Your payment history and timeliness is of paramount importance in determining your credit rating. Further, the size of your balance is taken into account, that is, how much money you use from the credit limit set for you by credit card issuer.

Your age and number of loans and credit lines, as well as the number of recent requests for loans or opening lines of credit will also be taken into account when determining your credit rating. The most important difference is that you can get your VantageScore for free.

Proprietary scores

Different types of credit scores are used by lenders as the main two models in determining the riskiness of potential borrowers. At the same time, by requesting your free credit report, you can see other numbers that are used just to inform you as a borrower for informational purposes so that you can roughly understand what is happening with your credit rating.

All credit bureaus have their own proprietary different types of credit scores that you cannot rely on at all times when applying for a loan to be approved. Such assessments that will guarantee you confidence in your abilities can still cost you some money.

Summarize

Now you are informed about different types of credit scores that may affect your financial capabilities or can be used simply to inform you, as a consumer, about the status of your credit.

Regardless of the level at which your credit score currently is, you can find financial support by filling out the loan application form, which is located on the screen. This will allow you to get offers from different lenders and assess your future opportunities to receive financing.


Read our financial blog and be informed about how to manage your personal finances.

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Lisa Mcdowell Expert in loans, credit cards, insurances, and your personal, responsive guide to a bright financial future.

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