NFCC Financial Education Blog ? Which Of My Credit ScoresIs The ...

By John Ulzheimer

Depending on whom you believe you can have as few as one credit score, and as many as hundreds of credit scores.?So who is telling the truth??The truth is they?re both right.?Follow me?

The apex predator in credit scoring is still your FICO credit score.?That?s not in dispute.?It?s by far the most commonly used credit scoring system so if you choose to focus on one brand of scores then it?s FICO hands down.?But you?ll need to be aware that there are 49 different FICO scores commercially available to lenders.? It can get maddening.?

You also have to consider your VantageScore credit score which is a relatively new scoring system backed by the three credit reporting agencies.?The range of the VantageScore credit score is 500-990 which overlaps, but doesn?t match FICO?s range of 300-850. Because the scaling overlaps there can be some confusion as to whether or not you?ve got a good credit score.?A FICO score of 750 is great while a 750 on the VantageScore scale is solidly average.

The use of those two scores account for the overwhelming majority of what?s referred to as credit bureau based risk scores.?But, they?re really just the tip of the iceberg.?You have countless other scores that you?ve never heard of and will likely never see.

Almost all mid size and large lenders use custom scoring systems.?A custom scoring system is just that, a custom developed credit score used by just one lender. Many of these scores use data from your credit applications (like income) and data from your credit reports.?In fact, many of these custom scores will use a FICO score as an input so it?s still important to have good FICO scores.

The Good News

The good news is that you only have three credit reports that can be used to calculate a traditional FICO score and a VantageScore credit score. Three credit reports is a whole lot easier to manage than countless credit scores. And, having good credit reports transcends all credit risk scores.?That means if you?ve got good credit you?re going to have good credit scores regardless of the scoring system. Unfortunately, having poor credit reports is going to lead to poor credit scores, again, regardless of the scoring system.

Your credit scores are going to be generated from the same data you can see by going to annualcreditreport.com and claiming your free credit reports.? They?ll be completely influenced by the presence or lack of derogatory information, your debt burden, inquiries, the age of your credit reports, and the mix of credit information.?And while it sounds overwhelming, it really isn?t.?All you have to do is pay all of your bills on time, keep the balances on your credit cards to less than 10% of their credit limits, and only apply for credit when you actually need it.?The credit scoring models will take care of the rest and will reward you, heavily, for doing the right things.? ?

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring, and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

Source: http://financialeducation.nfcc.org/2012/11/14/which-of-my-credit-scoresis-the-most-important/?utm_source=rss&utm_medium=rss&utm_campaign=which-of-my-credit-scoresis-the-most-important

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