Many people think that they only possess one credit score but this is simply not true. Various companies like banks and the big credit agencies use proprietary software to generate scores that are unique to their own particular needs. Despite their differences there are also a couple of things that all credit scores are based on. They always pull material from credit reports and they also assign a number to represent how they have rated your credit worth.
Once you get past those commonalities you will find that the differences will start mounting. Your credit score will certainly vary based on how each company rates your overall credit history and the importance they place on it. Financiers will frequently determine your risk using many of these different types of scores from companies like Experian, TransUnion, FICO, and VantageScore. You need to realize that the credit score you might think you have is not the only one assigned to you.
These scores are as far as FICO is concerned, but there are more credit scores than just the FICO score.
In order to help you wade through all of this credit score confusion there are things you should focus on to determine how strong your finances really are. There are 5 main credit scores that you need to watch with some frequency.
The FICO Score
This is the credit score that has been around the longest so it is used quite frequently by lenders. If you want to get a loan then there is a high probability that this score will be assessed by the lender. Fortunately there are easy ways for you to get a free copy of this report online.
The Vantage Score
This is one of the newer credit scores available to consumers and it is actually based on a partnership between TransUnion, Experian, and Equifax. The “Big Three” as they are known decided on this venture in an effort to provide consumers with an alternative to FICO. It gives people that have little prior credit the chance to obtain a credit score and purports to be more accurate than other scores out there. Eventually it might overtake FICO’s place as the king of credit scores.
The Credit Karma Score
This particular credit score is generated based on information gathered about you by TransUnion. The Credit Karma service actually watches for changes to your credit report and lets you know whenever something causes your score to change. It provides you with a number that will let you know how your credit is doing and it can be checked each day. Most people are usually fine with just a monthly peek. This is a great service for individuals that want a broad view of their credit well-being all in one handy location yet still have the ability to see changes as they happen.
The Credit Standard
This standard can help you determine just how good your credit score is and therefore help you get an idea of your likelihood of getting approved for loans at great rates. Currently a score of 720 is considered pretty decent but you will need a higher number in the neighborhood of 750 or more to get the best rates around. The current state of the economy has caused many lenders to be more stringent when considering who they decide to lend money to. As the economy mends itself with some help from new government regulations the credit standard will certainly fluctuate. You will have to monitor credit standards closely to be sure that you make the best financial decisions in the future.
The Insurance Score
This is the score that most people have never even heard of because it is only used by the insurance industry when pricing their premiums. It is based on credit and uses a combination of additional factors like how a person uses their credit, how much debt they have, and how often they made late payments. The insurance companies generate a score based on these factors and then use that number to determine how risky you are to insure. Their philosophy is that people with lower insurance scores are riskier and therefore should have to pay higher premiums for their insurance policies. That score has an enormous impact on how much your insurance will cost you.
The bottom line regarding credit scores is that you have to educate yourself on the many ways that your credit worthiness is being assessed. Since your credit has such a major impact on your ability to save money through better interest rates and an increased chance to obtain new credit, it needs to be understood. Once you take control of your credit you will be able to cash in on greater financial opportunities in the future.
