There are currently 7 credit scoring models, the most popular of them all is the FICO model and the Vantage model.
Many consumers are unaware that their credit score on Credit Karma is actually their Vantage credit score and not their FICO. The Vantage Score model was created in 2006 which was made to compete with the FICO Score model.
Your Vantage score is weighed differently than your FICO which is why your FICO score is oftentimes lower or higher than your Vantage Score.
With Credit Karma being the most popular credit monitoring service it leaves some consumers confused about which score they should focus on.
The FICO Scoring model was introduced in 1989 and the percentages of what weighs more have changed multiple times since it’s creation.
The current FICO model is called FICO 9 which was established in 2014 this scoring model gives consumers a score with a number between 300 and 850. The majority of the consumers under the FICO model have a credit score of around 620 to 750. Anything below a 610 is considered a poor credit score.
The lender that has to run a credit check could be utilizing an older version of FICO, you can find out which one it is by asking them before you apply. The most important weighing factors in your FICO score is your:
- Payment history = 35%
- Credit Card Utilization = 30%
- Credit Age = 15%
- Credit Diversity = 10%
- Number of Hard Inquiries = 10%
Payment history is when you make your payments on time, this will be reported every month so if you miss your mortgage, credit card, car note, or even rent payment you can expect a 35% change reflecting on your next report.
Credit Card Utilization
Credit card utilization measures how much credit you have access to in total versus how much you owe. If you have 3 credit cards with a $500 credit limit and you spend $400 on each card, your next credit score update will raise your credit card utilization because you have used 90% of your credit card’s limits.
Your credit age reflects how long you have had a credit score. The longer your account exists the more it will help your credit score. Credit truly does age like fine wine in all aspects.
Credit diversity is pretty self-explanatory it measures the types of accounts you have. So if you have a credit card, a mortgage, a car note, and student loans that you are current with you would have a diverse credit score due to each account being a different source of credit.
Number of Hard Inquiries
Hard Inquiries are the remarks left on your credit report when a lender pulls your credit report to verify if your credit report is within their standards. This often occurs from applying for a house, car, apartment, or any other lender that requires your credit score in order to serve you. You can ask your lender if your credit pull will be a soft inquiry or a hard inquiry, soft inquiries do not affect your credit score.
We would like to hear what you think about the FICO credit score model. Here at Credit Cadabra we believe we are approaching the era of FICO 10 do you agree?