Have you been searching the internet for ways to get your credit score for free? Well, there's always a catch when you see the phrase "Get your credit score at no charge!" You either have to sign up for a credit card or have a bank account with the company offering the free FICO score. You may also see that you can get your VantageScore for free if you sign up for Credit Karma. So, what's the difference between a VantageScore and a FICO credit score? And, how do they affect your ability to get credit? Let's review what your credit score consists of and the differences between the two scores.
What's In A Credit Report?
Your credit report comprises your personal information such as your name, date of birth, social security number, previous addresses, and employers. It includes all the types of credit you have, such as your mortgage, car loans, and credit card balances. You will be able to see any delinquent accounts such as past-due utilities, cell phone bills, and even medical debt. At the bottom of your credit report, you will see all public records such as bankruptcies, foreclosures, and any judgments that have been placed against you. Finally, all inquiries for credit will show to future lenders.
How To Rebuild Your Credit
What Is A Credit Score?
Your credit score tells future lenders how likely you are to repay any money they may loan to you. If you are making only the minimum payment on your accounts or if your accounts are maxed out, then they may see this as a red flag that you are overextending your available credit. Also, moving or changing jobs frequently affects the equation that creates your credit score. Finally, frequent inquiries on your account may leave lenders wondering why you are trying to obtain additional credit. So, it's essential not to constantly apply for new credit, especially if you want to make a big purchase soon.
See my feature in How to get an 800 Credit Score
What's a FICO Score?
A FICO score is your credit score that the Fair Isaac Corporation created. Your FICO score can range between 300 and 850. It's one of the most common scoring systems lenders use to help determine your creditworthiness. It can also vary depending on the reporting agency that the lender uses. For example, Experian, TransUnion, and Equifax may report your score differently because not all lenders report your credit information to each agency. However, each of the scores you receive from these agencies will closely represent your level of lending risk.
What's the VantageScore 3.0?
VantageScores were created in 2006. Experian, TransUnion, and Equifax created it as a way to create a more consistent credit scoring method. Your VantageScore 3.0 can also range from 300 to 850 and ranks your creditworthiness using a scale of A through F. You can track your VantageScore for free using CreditKarma, CreditCards.com, Nerdwallet, and more. Lenders sometimes use this model to determine your creditworthiness. However, I want to mention that it scores your credit differently from the FICO score, which could affect your credit approval if the scores are not interpreted similarly.
How Your FICO Score Is Calculated
35% Payment History - Your on time or late payments
30% Debt You Owe - Compared to your available credit
15% The Length of Your Credit History - When your credit journey started and how long your accounts have been opened/closed
10% Types of Credit - Mortgage loan, auto loan, credit cards, etc.
10% New Credit - Credit you applied for within the last two years and inquiries on your credit report.
See the difference between a credit charge-off and a collection.
How Your Vantage Score is Calculated
40% Payment History - Your on time or late payments
21% Depth of Credit - The length of your credit history and the types of credit you have
20% Utilization - The current debt you have
11% Balances - The amount of debt you owe on your current and delinquent accounts
5% Recent Credit - Credit you applied for within the last two years and inquiries on your credit report.
3% Available Credit - The total amount of credit available to you
Here's a great book that can help you on your credit journey. Your Score: An Insider's Secrets to Understanding, Controlling, and Protecting Your Credit Score (Ad)
FICO Scores and VantageScores are good tools to keep track of your credit history. However, it's also important to know that each lender may use a different mechanism to evaluate your creditworthiness. Keeping a handle on the credit you apply for, making on-time payments, and keeping your credit utilization low can help you increase your credit score. An important tip is to be patient as you watch your credit score grow.
Want to learn how to get rid of credit card debt once and for all? Read more here.