Question from John: Which credit score is used most?
Hello reader,
When it comes to credit scores, the most commonly used is the FICO Score. Developed by the Fair Isaac Corporation, the FICO Score is used in over 90% of lending decisions, according to the company’s data.
Understanding the FICO Score
The FICO Score ranges from 300 to 850, with a higher score indicating a lower risk for lenders. It’s calculated based on several factors:
- Payment history (35% of the FICO Score)
- Amounts owed (30%)
- Length of credit history (15%)
- New credit (10%)
- Credit mix (10%)
Other Types of Credit Scores
While the FICO Score is the most commonly used, there are other types of credit scores as well. These include the VantageScore, which was developed by the three major credit bureaus (Experian, Equifax, and TransUnion). The VantageScore uses a similar scoring range and factors to the FICO Score, but the weight given to each factor may vary.
Improving Your Credit Score
Regardless of the type of score, improving your credit score generally involves the same best practices:
- Paying your bills on time
- Keeping your credit utilization low
- Not applying for new credit frequently
- Maintaining a mix of credit types
If you’re looking to borrow money or take out an installment loan, lenders will likely check your FICO Score. Therefore, it’s important to monitor your credit score and take steps to improve it if necessary. There are many resources available to help you understand your credit score and how to improve it, including credit counseling services and financial education websites.
According to the Consumer Financial Protection Bureau, regularly checking your credit report can also help you spot errors or signs of identity theft, which can negatively impact your credit score. You’re entitled to a free credit report from each of the three major credit bureaus every 12 months through AnnualCreditReport.com.
In conclusion, the FICO Score is the most commonly used credit score, but understanding and improving your credit involves more than just focusing on one number.
