Are you in the market for new credit? Let’s say you’re thinking of buying a car or a home. You save up a down payment. You make a wishlist of what you want and need. And you start researching your options. Finally, to make sure you’re truly ready to buy, you look up your credit score.
That’s it, right? You’re now as informed as you can be and ready to shop.
Not so fast.
As smart as it is to stay on top of your credit score, that’s not the end of the story. You also need to be able to answer, “which credit score do lenders use?” Because the credit score lenders see isn’t the same as the one you see.
What types of credit scores exist?
By now it’s fairly common knowledge that everyone has more than one credit score. As crazy as it might sound, this doesn’t happen in an effort to confuse consumers. It’s the result of there being more than one major credit score developer. And each one has multiple versions of their scores as well as industry-specific scores.
To get started, you should know who’s making these credit scores. The top two are FICO and VantageScore.
The FICO Score
The FICO credit score was created by The Fair Isaac Corporation in 1989. The first-ever credit score, it was created to enable an unbiased way to make lending decisions.
With the advent of this score, people would be approved or denied for credit based on their past and current credit behaviors instead of their connections, race, or other factors that had nothing to do with credit.
FICO is now the leading credit score on the market in the U.S., used by 90 percent of lenders. And it’s been around long enough to now be up to nine versions of its basic score, with the FICO Score 8 being the most widely used.
Besides the basic FICO Score, there is also a FICO Auto Score and a FICO Bankcard Score, with multiple versions of each.
The VantageScore Credit Score
VantageScore, unlike FICO Score, was not created by an independent agency, though it is now owned by one. This score came about as a collaboration between the U.S.’s top three credit reporting agencies – Experian, TransUnion, and Equifax – and was launched in 2006.
This score was specifically created to take credit scores to the next level by making them more predictive. Where the FICO Score is limited to scoring consumers based on their basic credit behaviors, VantageScore’s formula is designed to go more granular on data from credit reports.
This granular look allegedly enables those who haven’t been able to build as much credit history to still be scored. And that gives access to credit to many consumers who wouldn’t have had it otherwise – 30 to 35 million more consumers, in fact.
Like FICO Score, VantageScore has more than one version – it’s getting ready to release its fourth version in the Fall.
Which credit score do lenders use?
It can be hard to keep up with all the credit scores and versions out there. And as nice as it is to know where you stand on them, the score lenders are using are the most useful to know.
So what credit scores do lenders use?
It depends. But you can get a decent idea of which based on the type of credit you’re applying for. (Though that doesn’t mean you’ll be able to see that exact score.)
For example, since 90 percent of lenders use the FICO Score, then you can probably rely on that being the one that’ll be checked. But VantageScore is growing fast – more than 8 billion VantageScore credit scores were used from 2015-2016.
Say you’re shopping for a car and your lender is using FICO. In that case, your lender is probably using the FICO Auto Score. But for a credit card, they’re probably using the FICO Bankcard Score.
Not only can you take an educated guess on the score they’re using, you can use this chart from myFICO to take a stab at which version of the score it might be:
While you aren’t likely going to be able to see these scores yourself – most scores consumers can see are educational credit scores – you can use common sense to get an idea of how you’re doing based on the score you can see.
For example, it’s probably safe to say that the formula used for the FICO Auto Score might put more emphasis on your past payment history with auto loans than other types of debt. The same could theoretically go for your credit card history and the FICO Bankcard Score.
How to find and use your credit score
While it would be nice to always know what credit scores do lenders use, that’s not always possible. Up until a few years ago, it was hard enough to catch a glimpse at your credit score at all. Thankfully, that’s changing.
Not only can you now see some versions of your score, you can do it for free. VantageScore has a list of providers that provide free credit scores and you can find a list of various types of credit scores here.
As for what to do with your score, use it to time purchases. VantageScore and FICO scores typically range from 300-850 (though some versions go higher). If your score is below 700, you might want to hold off on taking on new credit for a large purchase.
The lower your score is, the higher your interest rate will be. And since something like a home comes with a fixed rate and a long repayment period, that higher rate can cost you quite a bit when compounded over time.
This is why it pays to know your score. If you wait and practice good credit behaviors for two years, you can increase your score enough to qualify for a lower rate. Good credit behavior means paying off any collections accounts, reducing your current debt as much as possible, and never missing a payment or paying late on a bill.
And if you take those two years to improve your score, you’ll also have bought yourself more time to save a down payment. And that will enable you to reduce the total amount of debt you have to take on.
Knowing your credit score and using it to time your large purchases wisely can save you money. There’s simply no reason not to check your score.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|