Which Credit Score Do Lenders Use?

If you’re planning on applying for a loan, you might be wondering which credit score lenders use. Here’s what you need to know.

Credit Score Do Lenders Use?’ style=”display:none”>Checkout this video:

Introduction

We’re often asked “Which credit score do lenders use?” The answer is that lenders use many different types of credit scores, and the type of score they use can vary depending on the type of loan you’re applying for.

For example, a lender might use a different score when you’re applying for a mortgage than when you’re applying for a credit card. And within mortgages, there are even different scores used for different types of loans, such as FHA loans or VA loans.

But in general, the most important thing to remember is that there is no one “true” credit score. There are lots of different scoring models out there, and each lender will have its own preferences. So it’s always a good idea to check your scores from all three major credit reporting agencies –Experian, Equifax, and TransUnion– before you apply for any type of loan. That way, you can see where you stand and give yourself the best chance of getting approved.

The Three Types of Credit Scores

There are three types of credit scores: FICO® scores, VantageScores, and Experian® scores. FICO® scores are the most widely used credit scores by lenders, and are what we’ll focus on in this article. However, it’s important to know that there are other types of credit scores out there.

FICO Score

A FICO score is a type of credit score that is used by many lenders. It is calculated using information from your credit report, and it can range from 300 to 850. The higher your score, the better your creditworthiness, and the more likely you are to be approved for loans and credit cards.

The FICO score was developed by Fair Isaac Corporation, and it is now used by many lenders as part of their decision-making process. If you have a high FICO score, it means you have a good credit history and are likely to repay your debts. On the other hand, if you have a low FICO score, it means you have a poor credit history and are more likely to default on your loans.

There are three main types of FICO scores:
-Base FICO Score: This is the most common type of FICO score, and it is used by lenders to evaluate your creditworthiness. It ranges from 300 to 850, and the higher your score, the better your chances of being approved for loans and credit cards.
-Industry-specific FICO Score: This type of FICO score is used by specific industries to evaluate your creditworthiness. For example, auto lenders may use an auto industry-specific FICO score to decide whether to approve you for a car loan. These scores range from 250 to 900, and the higher your score, the better your chances of being approved for a loan or credit card in that particular industry.
-Customized FICO Score: This type of FICO score is created specifically for each lender. It takes into account factors that are important to that particular lender, such as your payment history with that lender or whether you have applied for a loan from that lender in the past. These scores range from 300 to 850, and the higher your score, the better your chances of being approved for a loan or credit card from that particular lender

VantageScore

VantageScore is a credit scoring model created by the three big credit bureaus — Equifax, Experian and TransUnion. It was introduced in 2006 as an alternative to FICO scores, and it’s now used by some lenders in the lending process.

VantageScore is a scoring system that rates your creditworthiness on a scale of 300 to 850, with 850 being the best score possible. A score of 700 or above is considered good, while a score of 650 or below is considered poor.

The VantageScore model looks at six types of credit information: your payment history, credit utilization, length of credit history, new credit accounts, types of credit accounts and recent inquiries. This information is then weighted to come up with your final score.

One advantage of VantageScore is that it’s constantly updated to reflect changes in consumer behavior. This means that it can be more predictive of future financial behavior than other scores, which can be a good thing for lenders who use it in the decision-making process.

VantageScore is also widely available — you can get your score from many different sources, including some financial institutions and Credit Karma.

Experian Score

The Experian score is one of the three main types of credit scores used by lenders. It is important to know which score a lender will look at when considering a loan or credit application.

Experian is a consumer credit reporting agency, and their score is based on information in your Experian credit report. This report includes information on your credit history, including late payments, defaults, and other factors. The Experian score ranges from 330 to 830, and the higher your score, the better your credit rating will be.

A good Experian score can help you get approved for loans and credit products with lower interest rates and better terms. If you have a poor Experian score, you may still be able to get loan approval but you may have to pay a higher interest rate. Improving your Experian score should be a priority if you are planning on applying for any type of credit in the near future.

The Credit Score Lenders Use

Your credit score is one of the most important factors that lenders look at when considering you for a loan. But which credit score do they actually use? The answer may surprise you.

Mortgage Lenders

Mortgage lenders will typically use the FICO® Score℠ from any one of the three credit reporting bureaus (Equifax, Experian and TransUnion). However, more than one score may be considered in some cases. The middle score from each bureau is often used. So, if you have a FICO® Score from Equifax of 680, a FICO® Score from Experian of 710 and a FICO® Score from TransUnion of 650, the middle score that would be used by most mortgage lenders would be 680.

Not all credit scores are created equal. Lenders understand this and each has their own risk appetite when it comes to approving mortgage loans. As a general rule, the higher your credit score is, the lower the interest rate you’ll qualify for on a mortgage loan. If your credit score is low, you may still qualify for a loan but you’ll likely pay a higher interest rate.

Auto Lenders

There are a lot of different credit scores out there, and it can be confusing to know which one your lender is looking at. The most important thing to remember is that the credit score your lender looks at may be different from the one you see when you check your own credit report.

Auto lenders, for example, typically use what’s called a FICO® Auto Score 8 model when they’re looking at loan applications. This score is specifically designed to help lenders evaluate credit risk in the auto lending market. It takes into account factors like your payment history, outstanding debt, and length of credit history, as well as new information that may be specific to the auto industry, like how many different types of loans you have and how long it’s been since you had an auto loan.

If you’re planning on applying for an auto loan in the near future, it’s a good idea to check your FICO® Auto Score 8 before you apply. You can get your score from myFICO.com.

Credit Card Issuers

Credit card issuers are usually the first lenders to get your credit information. They use this information to decide whether or not to approve you for a credit card and what interest rate to charge you. Credit card issuers typically use the FICO® Bankcard Score 8, which is a variation of the standard FICO® Score 8.

Mortgage lenders
Mortgage lenders usually focus on your middle score when considering you for a loan and what interest rate to charge you. For example, if you have a FICO® Score of 680, a lender may offer you an interest rate somewhere between the rate for someone with a score of 660 and 690. Having just one point higher or lower can make thousands of dollars of difference in what you’ll pay over the life of your loan, so it’s important to understand which credit score lenders use before applying for a mortgage.

Auto lenders
Auto lenders typically focus on your middle score when considering you for a loan and what interest rate to charge you. For example, if you have a FICO® Score of680, a lender may offer you an interest rate somewhere between the rate for someone with a score of 660 and 690. Having just one point higher or lower can make thousands of dollars of difference in what you’ll pay over the life of your loan, so it’s important to understand which credit score lenders use before applying for an auto loan.

Improving Your Credit Score

Your credit score is important because it is used by lenders to determine whether or not to give you a loan and what interest rate to charge you. There are three different credit scores, and the one that lenders use is called a FICO score . You can improve your FICO score by paying your bills on time, maintaining a good credit history, and using a credit monitoring service.

Pay Your Bills on Time

One of the single most important things you can do to improve your credit score is to pay all of your bills on time. Payment history is the biggest factor in most credit scoring models, so it’s important to make sure you’re never late with a payment. Even one late payment can have a significant impact on your score, so try to always pay at least the minimum payment on time.

If you have trouble remembering to pay your bills on time, set up autopay with your credit card or loan provider. This will ensure that your payments are made on time every month, and it can also help you avoid late fees.

You should also avoid opening too many new lines of credit at once. Every time you open a new credit card, loan, or other line of credit, it triggers a hard inquiry on your credit report. Too many hard inquiries can hurt your score, so try to space out any new applications for credit.

Keep Your Balances Low

One of the biggest influencing factors on your credit score is how much of your credit you are using, also called your credit utilization. This is the percentage of your credit limits that you are currently borrowing. So, if you have a $1,000 balance on a card with a $5,000 limit, your credit utilization would be 20%.

You might be thinking that carrying a balance is necessary to improve your credit score, but that’s not the case. In fact, carrying a balance can actually hurt your credit score because it lowers your average credit utilization ratio. So, even if you pay off your balances in full every month, if you are consistently carrying a balance from one month to the next, it will lower yourcredit score.

Monitor Your Credit Report

You can get a free copy of your credit report from each of the three major credit bureaus — Equifax®, Experian®, and TransUnion® — once every 12 months at AnnualCreditReport.com. Reviewing your own credit report and score does not hurt your credit in any way.

You may also want to consider signing up for a credit monitoring service. Some companies offer free credit monitoring, while others charge a monthly fee. Credit monitoring can help you spot signs of identity theft and may alert you to errors or changes on your credit report.

If you find errors on your credit report, you can file a dispute with the credit bureau and the creditor to have them corrected.

Conclusion

Though there are many credit scores available, FICO® Scores are the credit scores most lenders use when making decisions about extending credit. You have three FICO® Scores, one for each of the three credit bureaus – Experian, TransUnion and Equifax.