Which Credit Score is Most Important?
Credit Scores: There is so much information out there about credit scores it can make our heads spin with confusion, and indecision. Which credit score is the most important? Which credit score should I be worried about? Which credit score is the one most lenders use?
There are 3 major credit bureaus, Equifax, Experian, and TransUnion. There is also the Fair Isaac Corporation, more commonly known as FICO. The FICO website “about us” page defines FICO as “the leader in decision management”.You can read all about Fair Isaac Corporation (FICO), and how they define what they do at FICO.com.
There is so much information available on the internet about all the different kinds of credit scoring models offered by the credit bureaus, we could spend a full day just reading about them, and still not really answer the question “which one is most important?”
All three credit bureaus use a different credit scoring model for calculating credit scores. Some sources say Equifax is the only credit bureau that provides the actual FICO score directly to consumers. Experian calls their credit score the Experian/Fair Isaac Risk Model, or PLUS credit score. The scoring range of the PLUS score is 330 to 830. TransUnion calls their credit score Emperica. The Emperica credit score numbering range is 300 to 850. All three credit bureaus claim to have developed their individual credit scoring models based on the FICO score. Then there’s the grandaddy of all credit scores, the original FICO score, commonly called the MyFico score. The My Fico credit score numbering system is 300 to 850.
Another newer arrival on the credit score scene is the VantageScore with a scoring range numbering system of 501 to 990. Media sources report the three major credit bureaus collaborated to develop the VantageScore credit scoring model.
Are you confused yet? There’s more…
Another newer entry into the credit score mania is the new credit score first introduced by FICO in 2008 called FICO 08. As of the time of this writing,the score numbering system for FICO 08 is the same as it’s big brother, the original FICO score, 300 to 850.
Based on available current information, the biggest difference between the original FICO credit score, and FICO 08 is that a single late payment will NOT hurt the borrower as much with FICO 08 when applying for a loan, as with the original FICO score.
Are you suffering credit score information overload yet? Welcome to the club…
There is a simple bottom-line answer to the question “which credit score is most important”
The simple answer is: the most important credit score is the credit score being used by the financial institution to which YOU will be applying for a loan to determine your eligibility for the loan.
Most consumer advocates, and financial industry sources are saying MOST financial lending institutions, banks, and credit unions are still using the original FICO score to determine a borrowers loan eligibility. They won’t always tell you, but it is good financial diligence, and practice to ask the lender/financial institution to which you are applying for a loan, which credit bureaus, and credit scores they will use to determine your loan eligibility. Most lenders consider any credit score over 700 a good credit score. Mortgage lenders tend to prefer credit scores of 720-730 and higher. The higher your credit score, the better position you are in to negotiate the lowest possible interest lending rate.
The same basic guidelines still apply to help build the best credit history, and credit score:
#1 Pay EVERY bill on time EVERY month. Never be late with a payment. This includes utility bills, cable TV bills, etc. That means EVERY bill, even what may seem to be the most insignificant bill with the smallest balance.
#2 Always use as little of your available credit as possible.