Credit scores can determine the conditions you are offered on loans, jobs you may receive and where you can sign residential leases. These scores are determined by calculating the information on your three credit reports. The three credit bureaus (Experian, TransUnion and Equifax) each maintain an individual report on your credit history.
There are two main credit scoring models: FICO and VantageScore. These credit scoring models have multiple variations that are used by specific lenders. A 2012 Consumer Financial Protection Bureau (CFPB) report suggests there are 49 separate FICO scores, some of which are industry-specific. For instance, there are FICO scores that are used in the auto and mortgage lending industry. VantageScore also has multiple scoring models. Some of these variations, especially for FICO scores, have been around for many years.
Your credit scores can vary depending on the type of scoring model that was used to calculate the information in your credit reports. If you are using a website like CreditKarma, your scores are being calculated with the VantageScore model. For a service like MyFICO, your scores are calculated using the FICO model or one of its many variations.
How Can I Improve My Credit Score?
While all of this may sound very confusing, there are still some universal rules that apply to improving your credit scores.
Paying bills on time and utilizing your credit responsibly will improve your credit scores, regardless of the model or variation used. These are factors that show lenders that you are financially stable. Lenders are looking for consistency, either good or bad, when they make their decisions. Certain mistakes can also sink your scores, regardless of the model or variation that was used. Late payments and irresponsible spending can harm your scores.