The Best Little Money Book
Tip of the Month
We are sure you know about credit scores and you may even know your own but do your know how that score was calculated?
Each of the three major credit bureaus has its own scoring system. In 2006, the three bureaus got together and developed another scoring system called Vantage Score. The Vantage Score helps people who have limited credit history and provides more accuracy and consistency to credit scores. Currently, the scores range from 300 to 850 if Vantage Score 3.0 is being used. The scores ranged from 501 to 990 in the 1.0 and 2.0 versions. Ask your lender if they are using a FICO or Vantage Score. If it is Vantage Score, ask which version.
Payment history, age and type of credit and how credit is used play a large part in determining your score. We always recommend keeping your balances for utilization or credit limit under 30 percent to get the highest score. For example, if your credit limit is $1,000, keep your balance under $300. Total balances have a moderate influence on your score and recent behavior and available credit have the smallest influence on your score.
If you ask for a Vantage Score from each credit reporting agency, you may get three different scores because your lender may not have reported information about your use of credit to all three of the large bureaus, the information was sent to the agencies at different times, or you requested a copy of your reports at different times.
In addition to the Vantage Score, each bureau has its own scoring method and lenders have their own systems. Therefore, it is important that you ask what score was used and, if it is a Vantage Score, which version was used.
For more information about Vantage Scoring go to https://your.vantagescore.com.
You will find this same information in our new book – The Best Little Credit Book -- that we come out in the fall as an e-book. Look for the announcement at this website coming soon.