Credit Score Confusion

Everyone talks about credit scores these days, but they aren’t all talking about the same thing.

“Credit score” has become a generic term that covers all the various kinds of credit scores. It’s no wonder consumers get confused.

When you apply for a mortgage loan, your lender will probably order a traditional FICO score. This score will be based on the scoring method developed by FICO (the Fair Isaac Corporation) using the credit data supplied by each of the 3 major credit reporting bureaus.

But… it might not be a traditional FICO score. FICO has now come out with the FICO 8 scoring model, and is encouraging lenders to switch over. On top of that, the 3 credit bureaus got together and created their own scoring model, called the Vantage Score. Your lender may be ordering a report based on that model.

The next area of confusion is that different industries get custom credit scores based on what matters to them. For instance, your score in making a home loan application could be different than your score when you want a car loan.

All creditors want to see that you’re a responsible consumer, intent on paying your obligations on time. However, a bank giving you a car loan will want more weight given to your history with regard to car loans than with house payments.

You might say they’re looking at your credit report to see what matters most to you… what obligations you will pay even if you get into a financial bind.

Another point of confusion lies in the score ranges. FICO scores start at 300 and go to 850. Others start at 330 or 350 and go to 830 or 850. But the Vantage score doesn’t start until 501 and goes to 990. So if you’re looking at a score of 660 – you may be rated “good” using a FICO score, but not so good using the Vantage score. If you have doubts, ask what scoring model was used.

All the scoring models use much the same information, but they give different weight to the categories. That’s another reason why your scores could be different coming from two different sources.

In general, the various scoring models use information that includes:
• Payment history
• Amounts owed
• Length of time you’ve had credit
• New credit or new credit applications
• Types of credit used
• Credit available to you

This is true whether you pay for a FICO score or get a free credit report from a site such as this one. And rest assured that if a free credit report says your credit is “excellent” it won’t suddenly fall to the “poor” category on a FICO score.

Since you can’t dictate the scoring model used to “judge” you, what can you do?

Pay attention to all the categories. Pay every obligation on time, keep your credit card utilization at 30% or less of available credit, keep all of your old accounts open, and avoid making numerous credit applications. When store clerks urge you to “Get 15% off today” for opening a new account, say thank you… but don’t do it.

On the flip side of that – do try to use different forms of credit. When you can successfully handle a credit card or two, a car loan, and a mortgage payment, it shows creditors that you’re a responsible money manager… and it improves your credit scores.

Do monitor your credit scores.

Don’t wait until you want a new car or a home loan to find out if you’re making damaging mistakes in your use of credit. Get your free online credit scores, or go to FICO or one of the credit bureaus and purchase your score. It won’t be the exact score your lender will see, but it will be close enough to let you know how you’re doing and if you need to take steps to raise those scores.

One Response to “Credit Score Confusion”

  1. In my point of view we can use the credit score to measure the level within your economic management expertise.

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.