Your credit score encompasses a range of numbers depending on where you fall when it comes to paying off your debt. It includes your payment history on things like lines of credit, credit cards and mortgage payments. Many times, when you go to buy a car, rent an apartment or get a personal loan, the lender will have to check your credit score. They want to make sure you are good for the money. They want to make sure you will pay back what you owe. Your credit score shows them how well you have paid back debt in the past.
There are two different models to measure credit score: FICO and VantageScore. FICO Score Model The FICO score model may be the one you recognize. Most likely, you did not even realize there is another model to measure credit score. That is okay. Most people are not aware of the other type of score. The FICO score model ranges from 300 to 850. 300 is very poor credit while 850 is the best of the best. The FICO score is the most popular model.
What Goes into a FICO Score?
There are a few main components that help determine a FICO score. These include the following: payment history, length of credit history, new credit, amounts owed and your credit diversity. Payment history is how well you have made on-time payments in the past. Length of credit history is how long you have had different loans of credit out for. New credit shows the credit you have taken out recently. It is weighed differently than credit you have had out for years. Amounts owed is the amount of debt you owe with each account. Credit diversity is the number of different types of credit you have. Having 10 credit cards and no other credit might not be as good as having two credit cards, a car payment and mortgage. Typically, the most important, or the one that affects your credit the most, is your payment history. So, this includes making payments on-time and how long you have been making payments.
This model was created by the credit bureau as an alternative to the FICO model. The VantageScore model also has a range of 300 to 850 with the same meanings for the scores. The main difference, when it comes to the VantageScore model, is that unlike FICO, you can have a very short credit history and still get access to your score. It will also help you borrow easier if you are borrowing based on your credit. If you are looking to borrow money either based on your credit score or not, make sure you are doing your research into each lender. You want to research the lender you are choosing so you do not get into more debt than you realize. Check out this article on how to choose the right payday lender:https://hitcashnow.com
What Goes into the VantageScore Model?
The VantageScore model is also very similar as to what affects your score compared to FICO. The components of the VantageScore Model include the following: payment history, balances, recent credit, depth of credit, utilization and available credit. Payment history is based on how frequently you make on-time payments. Balances show your current debt level. Recent credit is like new credit. Dept of credit shows how much you can loan up to with each line of credit. Utilization compares your outstanding credit to your credit limit with each line of credit. Available credit is the amount of credit you still have left. Similar to FICO, your payment history is the most important factor contributing to around 40% of your VantageScore.