This may be a shocker, but that all-important number in the world of borrowing -- your credit score -- doesn’t really exist. Well, at least not in singular form. Believe it or not, you couldn’t count all of your possible credit scores, even if you used all of your fingers and your toes.
Simply put, you could have dozens of scores.
Even so, all credit scoring models share a common purpose: They examine your current and past credit behaviors to predict if you’re likely to pay back money that a lender is contemplating loaning to you -- whether it’s a car loan, a credit card or a mortgage.
Your score is calculated by taking the information held at a credit bureau and running it through a scoring model.
Here’s why you could have so many scores:
Often, your FICO score and credit score are used synonymously. That’s nice for FICO, the company that created credit scoring, but it’s kind of like calling all soda Coke.
A few years ago, another big player entered the fray: VantageScore. The credit bureaus themselves, in an attempt to tap into the big bucks of credit scoring (and cut what they pay to FICO), created this new form of credit scoring.
Different information coming in equals different scores going out. Any of the three credit bureaus -- Equifax, Experian and TransUnion -- could supply the raw data that go into a particular credit scoring model. But not all lenders report the same information to each bureau, so your score may be different based on which database is used.
There are different models for different types of lending. There’s a score designed to determine how much of a risk you are in general, but there are also scores for lenders who want to gauge your risk specifically for a car loan, credit card or mortgage.
Over the years, credit scoring has gotten more sophisticated. However, some lenders may not want to pay for the latest and greatest scoring version when they’re already using an older (and less expensive) method to calculate your score. This means they save some money while you have yet more possible credit scores.
Most people are familiar with the 300-850 spectrum of scores that is widely used, but there are a whole bunch of different score ranges. Heck, there’s even a scoring model where a lower score is better than a higher score. Maybe that 300 isn’t so bad after all!
Despite the potential confusion created by these different scores, there’s good news. Whether you have three or 103, you can be laser-focused in your effort to build, repair or maintain a top-notch score. Do the right things, and everything should fall into place, no matter how your score is calculated.