Score Advice

Why Are There Different Credit Scores, and Is One More Accurate Than Another?

Credit scores help lenders predict the likelihood that a person will repay a debt as agreed. There are different credit scores for different kinds of lending, and different types of lenders.

For example, a credit card company tries to predict the likelihood that you will repay credit card debt in a timely manner. So, they use a credit scoring model designed specifically for that type of risk. Auto lenders will look at scores that specifically determine the likelihood you will repay your car loan on-time. A mortgage lender will use a score that is tailored to predict risk in mortgage lending. Credit unions may use different credit scores than national banks because the customers at each use credit differently.

Additionally, there are many kinds of scoring companies. VantageScore and Fico are two of the best-known.

Using the analogy of cars can help you understand why there isn't just one credit score or credit scoring company. Imagine two four-door sedans. They are about the same size, have the same number of doors, gasoline engines that produce about the same amount of power, four wheels and a steering wheel. So, why does a person choose one over the other? Small differences in design make one car better suited to a person's particular needs than another.

The same is true of credit scores. All credit scores use the same information from your credit report, but they treat the information slightly differently to meet the needs of the lender. And, because different credit scores have different ranges, it's possible to have two different numbers that both indicate you are a good credit risk.

When looking at credit scores, it is important to focus not on the number, but on the risk factors that are affecting the score you receive. When you order a credit score, risk factors are provided to help you understand how to improve your credit score in the future. While the numbers can be quite different, the risk factors tend to be very consistent.

If you take care of your credit report and address your risk factors, your credit scores will take care of themselves.

Check out the scope to hear answers to all the questions asked.

Do you have questions about credit?

Join our live video chat every Tuesday and Thursday at 3:00 p.m. ET on Periscope. Rod Griffin, Director of Public Education at Experian, is available to answer your questions live.
Scoped on: 11/7/2017

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