Credit scores are pivotal in determining your creditworthiness when it comes to securing loans, credit cards, and other financial products. Here, we navigate through the different types of credit scores available and what they mean.
What is a Credit Score?
A credit score is a numerical representation of your ability to repay debt. It’s calculated based on your credit habits, such as timely repayments, amount of debt, longevity of credit and types of credit used.
FICO Score
FICO score, created by the Fair Isaac Corporation, ranges from 300-850. This is one of the most widely used scoring systems by lenders and it measures a borrower’s credit risk using five factors: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%) and new credit (10%).
VantageScore
VantageScore, developed by three major credit bureaus (Experian, Equifax, TransUnion), also ranges from 300-850. It’s similar to FICO but weighs differently: payment history (40%), age and type of credit (21%), credit utilization (20%), balances (11%), recent credit (5%) and available credit (3%).
TransUnion Score
TransUnion uses a scoring system where the credit scores range from 300-850. They use information from your credit history to calculate your score, with emphasis on payment history, amount of debt, length of credit history, new credit and credit mix.
Equifax Score
Equifax offers two types of credit scores: Equifax Credit Score and FICO score. The Equifax Credit Score ranges from 280-850 and is used to predict the likelihood of you becoming 90 days late on a loan, while their FICO score is calculated similarly to the manner described above.
Experian Score
Experian offers the FICO score and its own PLUS Score. The PLUS Score ranges from 330-830 and is intended for educational purposes, not lending decisions. It illustrates how your financial behaviours affect your overall credit health.
Understanding the different types of credit scores allows you to gain insight into your financial health and increases your chances of securing favourable loan terms. So, keep track of your credit habits and strive to maintain a high credit standing!
