Credit scores can be very confusing. What do the numbers mean? How are they calculated? Why are they different? Let us explain. Remember,Coram poor credit doesn’t have to stand in the way of a new car.
Before standardized credit scores, lenders and loan officers would create and use their own methods of determining the risk of lending to a particular party. There was little to no uniformity between lenders and this method possessed major issues. The number one issue being the lender or loan officer’s ability to correctly judge the risks. This all changed in 1980, when the Fair Isaac Corporation created the first general purpose credit scoring system based on credit bureau information to remove inconsistencies in individual lender’s credit diagnostics. This system is now known as the FICO score.
Your scores differ between the different credit agencies, Equifax, Experian, and TransUnion, because each agency receives different credit reports and each has their own scoring model. For example, Equifax may be missing an important account that TransUnion may have on file. This account could help or hinder your score, so, whether it is present or not affects the individual score. A simple way to ensure accuracy in your scores is to makes sure each agency has the most recent and accurate information. Credit scores can differ within the same agency depending on what or who is pulling the information. For example, car loan lenders and home loan lenders will pull a score calculated from different loan information when deciding if and how much to offer.
While FICO is the most well-known, there are other credit score providers like VantageScore, NextGen, BEACON, and EMPIRICA. What’s considered a good score depends on the scoring system, the corporation, and what you’re applying for. FICO, Equifax, VantageScore, and TransUnion scores range from 300 to 850 while Experian scored range from 330 to 830. At a local car dealership, a score of 500 may be good enough to get a used car while a minimum of 700 may be needed for a home loan. Though it may seem complicated, your score and their numbers all come down to your loan history and can be changed at any time. For more information about credit scores, contact our Li Credit Center today.