FICO Scores vs. Other Credit Scores
There are several types of credit scoring models, and your FICO score is one example. FICO scores are the most commonly used by lenders and creditors. Below, we’ll go over what you should know about how FICO scores work and how they compare to other credit scores.
What is a credit score?
Your credit score is a three-digit number that can show how responsible you are when you borrow money. Your credit score can impact your ability to get approved for a credit card or loan. It may also determine the interest rates and terms you receive. The higher your credit score, the more opportunities you’ll have for financing offers with attractive rates and terms.
How your FICO score works
FICO scores were created in 1989 by the Fair Isaac Corporation. They are based on five factors: payment history, credit utilization, length of credit history, new credit, and credit mix. Your FICO score falls anywhere from 300 to 850. A higher FICO credit score indicates you’re good at paying back your debts, while a lower score can make you appear as a riskier borrower to lenders.
Is my FICO Score the same as my credit score?
Your FICO score is a type of credit score. It’s one of the several credit scoring models available. Just like other models, it can give lenders a good idea of how creditworthy you are as a borrower.
What’s the difference between my FICO score and other credit scores?
While many lenders use FICO scores when they make lending decisions, there are other types of credit scores as well. VantageScore, for example, was created in 2006 by the three major credit bureaus: Equifax, Experian, and TransUnion.
Compared to FICO, VantageScore focuses more on credit age and utilization. And Experian Plus and Equifax Credit Score are some proprietary credit scoring models that are known as educational credit scores, since lenders don’t actually use them when making decisions.
Ways to check your FICO score
To check your FICO score, reach out to your credit card company. Many credit card companies, like American Express and Bank of America, offer free credit score access to their cardholders. You can also find a website with free credit score monitoring.
How to improve your FICO score
To improve your FICO score, follow these tips:
Make on-time payments
Make sure you pay all bills on time, every time. These include your credit cards, car loans, student loans, personal loans, and other loans. Even one late or missed payment can lower your score.
Keep your credit utilization ratio low
Your credit utilization is the percentage of revolving credit you’re using out of the revolving credit available to you. To keep it low, pay down your debts or ask for a credit card limit increase.
Limit hard inquiries
Hard inquiries happen when you apply for a loan and the lender checks your credit score. Since they can temporarily lower your credit score, don’t apply for too many credit accounts at once.
Leave old accounts open
It may be tempting to close accounts you no longer use. But doing so can shorten your credit history. If possible, leave all of your old accounts open.
Consolidate your debt
If you’re overwhelmed with debt, debt consolidation can be a good option that can also help your credit score. Debt consolidation involves rolling a few of your debts into one loan or credit card with one, easy-to-manage payment, ideally with a lower interest rate.
Do I need a good FICO score to get approved for a loan?
Some lenders have lenient credit score requirements, so you don’t always need a good FICO score to get approved for a loan. Advance America approves borrowers with poor and fair credit scores. We are pleased to offer several loans, such as payday loans, installment loans, title loans, and lines of credit. Learn more about our loans and get the funds you need by visiting AdvanceAmerica.net today.