Credit Sesame’s Money Mentor video explains your FICO score vs VantageScore.
It’s a myth that there is just one magic credit score telling lenders about you. In fact, lenders use many different credit scoring models, including the FICO score and the VantageScore. When you apply for a loan, you probably won’t know which credit score the lender uses.
Here’s what you need to know about the FICO score vs VantageScore 3.0
The FICO score was developed by – surprise – a company called FICO. The VantageScore 3.0 was designed by all three major credit bureaus – Experian, Equifax, and TransUnion.
The credit score you see on your Credit Sesame account is the VantageScore 3.0.
Both models calculate your credit score by measuring the same five factors: payment history, credit utilization, credit age, credit mix, and credit inquiries.
Here’s how those factors apply:
… whether you pay at least the minimum amount due on time – is the most important component of your credit score. Pay your bills on time consistently and you’ll be on your way to a solid credit score.
… means the percentage of total available credit that you’re using. So if your credit limit is $1,000, and your balance is $500, your utilization is 50%. When it comes to credit utilization, lower is better. We suggest keeping this number under 30%, and ideally under 10%.
… is exactly what it sounds like – the average age of your open accounts. A long, steady track record of responsible credit use will bolster your credit rating.
… tells lenders how you handle different types of credit like auto financing, mortgages, and credit cards. A little variety can enhance your credit score. Finally, there are …
When a lender checks your credit to process a loan application, it creates a “hard inquiry”. Each hard inquiry temporarily drops your credit score a few points, and those add up. That’s why we recommend applying for new credit only when necessary.
So, what’s the best credit score model?
The answer is, it depends. There are many variations of credit scoring models, including models specifically designed for the mortgage, automotive, or credit card industries. Your credit score will probably vary depending on the model used, and it’s normal for the credit score you see on Credit Sesame to differ from the score a lender sees when it pulls your credit.
The value in checking your score with any model is to track it over time. To see if your score is improving or going down, so that you can make changes if needed. At Credit Sesame, we want to empower you with the knowledge you need to improve your credit score, and our score is designed to do that.
How does Credit Sesame calculate your credit score?
The credit score you see on Credit Sesame is based on the VantageScore® 3.0 scoring model. It’s provided by TransUnion, but when you upgrade to our premium services, we show your score from all three credit bureaus. You’ll also get access to many other resources to help protect your credit.
How can Credit Sesame help you prepare to apply for a loan?
You probably won’t know which credit scoring model a lender uses when you apply for a loan, but nearly all scoring models use the same factors. Routinely checking one score can tell you how changes in those factors impact your score. If your score improves or falls with one model, chances are good that it’s doing the same with other models.
If your bank or credit card company offers free credit scores, we encourage you to keep an eye on those as well as your Credit Sesame score. This can help give you an idea of how different models affect your credit score range.
It’s important to stay on top of your credit score over time to track changes in your profile. And to take swift action if you become the victim of fraud or credit reporting errors when your score unexpectedly falls.
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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.