Lenders use risk-based pricing, which means that a borrower who presents a higher risk won’t get as good of an interest rate than someone who has excellent credit. So if the threshold to qualify for financing is 500, a borrower with a credit score of 499 will be denied.Īdditionally, the interest rate a lender offers you can also be determined by a few points on your credit score. When a few points can make a big differenceĭepending on the type of loan, borrowers might have to meet certain thresholds to qualify.įor example, to qualify for an FHA-insured mortgage loan, borrowers must meet a certain credit score rating or else the lender can’t make the loan. What is a bad credit score?Īny score that falls between the 559 or lower is considered “poor” by the VantageScore 3.0 model, whereas a credit score of 579 or lower is considered “poor” by the FICO 8 credit-scoring model. According to the FICO 8 scoring model, a good credit score is between 670 or higher. The VantageScore 3.0 model ranks a good credit score as being between 670 or higher. It is for educational purposes only, so that consumers can see their relative credit risk level. The PLUS score is a consumer-only score, developed by Experian. It predicts how likely specific consumers are to default within the next three months. TransUnion New Account Score 2.0: Range of 300-850įinancial institutions use this model to manage their existing accounts. Here’s a look at a couple of other credit scoring models: One thing all of the models have in common is that a lower credit score equals more risk and a higher credit score equals less risk. FICO does not.Īlthough VantageScore and FICO are the most popular credit-scoring models, other models exist. VantageScore will accept alternative scoring data, such as utility, rent and phone bill payments that have been reported to the credit bureaus.VantageScore only requires one month of history and one account reported within the past two years.FICO requires at least six months of credit history and at least one credit account reported within the last six months.Scoring Requirements – VantageScore’s consumer-friendlier model can issue credit scores to 30-35 million people considered “unscoreable” by FICO. Multiple Credit Inquires – Both FICO and VantageScore penalize you for multiple hard inquiries within a short timeframe, unless you are rate-shopping (auto or mortgage) in which case it’s counted as one inquiry. Paid Collection Accounts – Collection accounts you have paid-off no longer count against you with FICO or VantageScore. Rating Criteria – Factors that matter most in FICO scores also carry the most weight for VantageScore: Score Ranges – VantageScore and FICO score on a range of 300 to 850 with similar ratings.Ĭredit File Sourcing – Both gather consumer credit files from TransUnion®, Equifax® and Experian®. Here’s the breakdown of the ranges within each specific scoring category:Īlthough the VantageScore and FICO models have basic similarities, they also have a few primary differences. They predict how likely a consumer is to default on payments for any type of account. The FICO scoring model generates both base and industry-specific credit scores.įICO’s base scores are based on a credit score range of 300-850. The FICO model was the first credit-scoring model introduced to the lending world in 1989 by the Fair Isaac Corporation. Here’s the breakdown of the ranges within each specific scoring category: VantageScore 3.0 is the most popular VantageScore scoring model with credit score ranges from 300–850. The goal was to a better and fairer scoring model that was easier to apply. VantageScore was created in 2006 by TransUnion, Experian and Equifax. What one lender considers as a “good” credit score, another lender might consider as just “fair,” depending on the credit-scoring model used. Each range has a rating, such as “poor,” “fair,” “good” or “excellent.”īut the FICO and VantageScore models have different breakdowns for credit score ranges. Both models have ranges of numerical scoring that categorize a consumer’s credit score. Two of the most popular credit scoring models are VantageScore and FICO. Here’s what you need to know about credit score ranges: Credit score rangesĬredit scores typically have a range of 300 to 850, and a good credit score ranks at 700 or higher. Generally, the higher your credit score, the less of a credit risk you present. Your credit score - it’s essentially a mathematical calculation that can make or break your financing dreams.Īll credit scores fall into a specific credit score range, which tell what type of credit risk you present.
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