Which Credit Score Do Lenders Use?

Question from John: Which credit score do lenders use?


When you apply for a loan, lenders use your credit score to assess your creditworthiness. The credit score they use depends on the type of loan you’re applying for and the lender’s preference.

Understanding Credit Scores

Credit scores are numerical representations of your credit risk, based on your credit history. The most commonly used credit scores are:

  • FICO Score: Developed by the Fair Isaac Corporation, it ranges from 300 to 850. The higher the score, the lower the perceived risk.
  • VantageScore: This is a competitor to FICO and also ranges from 300 to 850.

Which Credit Score Do Lenders Use?

Most lenders use the FICO score when evaluating loan applications. According to the Fair Isaac Corporation, 90% of top lenders use FICO scores. However, there are different versions of the FICO score, and lenders may use different versions for different types of loans. For example, auto lenders and credit card issuers often use FICO Auto Scores and FICO Bankcard Scores, respectively, which have a slightly different scoring model.

On the other hand, some lenders may use the VantageScore, especially for certain types of loans. The VantageScore is becoming increasingly popular because it can score more people than the FICO model, including those with a limited credit history.

How to Improve Your Credit Score

Regardless of the credit score model used by lenders, the following steps can help improve your credit score:

  • Pay your bills on time: Late payments can significantly lower your credit score.
  • Keep your credit utilization low: This is the ratio of your credit card balances to your credit limits. A lower ratio is better for your score.
  • Don’t apply for too much new credit at once: Each application can result in a hard inquiry, which can lower your score.
  • Monitor your credit report: Regularly check your credit report for errors and dispute any inaccuracies you find.

Remember, maintaining a good credit score is crucial for securing loans with favorable terms. It’s always a good idea to monitor your credit score regularly and take steps to improve it if necessary.

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