Types of Credit Scores
Your credit score helps lenders determine how likely you are to repay a loan. If you understand the types of credit scores out there and how they work, you can increase your chances of securing a loan with good rates and terms. Let’s take a closer look at the different types of credit scores that exist.
What is a credit score?
A credit score is a three-digit number that lenders use to assess how risky it may be to lend you money. It considers your financial history and predicts your ability to repay debt. While a high credit score indicates you may be responsible with money, a low credit score means that you could be a risky borrower. A high credit score will make it easier for you to get approved for the loans you want.
What are the different types of credit scores?
The different types of credit scores include:
FICO Scores were created by the Fair Isaac Corporation, and consider five factors including your payment history, credit utilization, length of credit history, new credit, and credit mix. FICO Scores range from 300 to 850, or from poor to excellent.
The VantageScore formula is very similar to the FICO score formula, but this credit score model considers six factors instead of five. VantageScores look into payment history, age and credit type, credit utilization, total balances, recent credit, and available credit when determining your score. Just like FICO scores, VantageScores fall in the 300 to 850 range, or very poor credit to excellent credit.
Other types of credit scores
Even though FICO Scores and VantageScores are the most common credit score models, there are other types of credit scores. For example, car insurance has its own credit score that looks at your auto claims history and helps calculate your premiums. Home insurance also has a unique credit score that considers your home and neighborhood.
How is your credit score calculated?
Each type of credit score is calculated differently. Many of them, however, look at factors such as:
Payment history may show whether you can make timely payments on your mortgage, credit cards, car loans, and other bills. Consistent on-time payments can keep your credit score high.
Credit utilization refers to how much of your available credit you use. It’s the total of all of your balances divided by your total credit limits, multiplied by 100.
Length of credit history
The length of credit history is how long each of your accounts has been open. If you’ve had your accounts for a while and make timely payments, your credit history may be in good shape.
How to check your credit score
There are many ways to check your credit score for free. You may visit AnnualCreditReport.com to pull your credit reports from Experian, Equifax, and TransUnion for free once a year.
You don’t need a good credit score to get an Advance America loan
Even if you have poor credit or fair credit, you may still get approved for an Advance America loan. We offer a variety of products including payday loans, installment loans, title loans, and lines of credit.
You can fill out an easy application for our loans online or in-store and get an approval decision quickly. Upon approval, you may receive your funds as quickly as the same day you apply. Visit Advance America today to learn more about the loans we offer.