Most consumers think they have only 3 FICO scores – one for each bureau-Equifax, Experian and Transunion. Actually, a person has dozens of FICO scores.
There are six major types of FICO scores–General, Auto, Mortgage, Credit Card, Installment loan, and Personal Finance. Different factors are taken into account to generate a score. For example, an auto FICO score places more importance on the history of any previous auto loan that the consumer had. A credit card FICO score looks more at a person’s handling of credit card balances and payment history. Some even look at whether more than the minimum payment is made every month.
The highest FICO scores are personal ones that fall under the General score category. One of the most frequent questions we get is based on this scenario: a borrower will go to a loan officer after having pulled their own credit and walk in with a 740 score. The lender then pulls the credit of the borrower using the Mortgage program used by banks and mortgage companies, and the score is 680. This is because the FICO scores are based on different criteria. While it’s a good idea for everyone to order their free credit report every year, it’s not necessary to order (and pay for) the scores that go along with them. Personal scores aren’t used by any industry for any reason. They are more of a “warm and fuzzy” number to make a person feel good about scores than anything else.
The bottom line is that a consumer shouldn’t get caught up in all the various FICO scores. Instead, focus should be on the important things that surround all FICO scores: paying bills on time, not running up a lot of revolving debt, keeping revolving balances below 20% of the high credit limit, not closing accounts, and only opening new accounts when absolutely necessary. These action will ensure a good FICO score no matter what model it is being pulled from.
For additional information about credit report and scores, click here
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