The best way to get your free credit score. We created this in-depth article to explain the different types of credit scores, along with where you can get them. While a free credit score is great for giving you a general idea of your credit-worthiness, they’re often inaccurate. On top of that, creditors and lenders often use their own internal system for calculating credit scores! But before we get into the pros and cons, let’s talk about what a credit score is and how it’s calculated.
How are Credit Scores Calculated?
You have more than one personal credit score. In your quest to get your free credit score, you’ll quickly notice that it is different with each credit bureau. You’ll also notice differing scores depending on how you check your credit and which service you use to pull your credit bureau reports. Let’s talk about the credit bureaus for a moment.
What Are Credit Bureaus?
Just about every financial transaction you enter into is tracked and analyzed at a high level. There are three major credit bureaus and they are: TransUnion, Experian, and Equifax. Each credit bureau pulls information from a variety of sources. Mortgages, credit cards, loans and even data providers. Each bureau consolidates your financial data into a credit file, unique to each bureau. This credit file is then consolidated into an easy to read credit score.
How Many Credit Scores Are There?
The credit bureaus use two primary credit scoring models to determine your credit scores. The FICO® score and the VantageScore. Both are similar, yet each model produces a unique score based on your financial data, plus each model’s unique algorithm. Lenders often use both models, in addition to their own custom scoring models, to determine your credit risk. It’s important to know the difference between each model. That said, here’s the skinny on what a FICO® score is and what a VantageScore is.
What is a FICO® score?
The FICO credit score is the first consumer credit scoring system adopted at mass scale. It was introduced in the United States around 1956. It has largely been the most trusted source of consumer credit scoring available to lenders and creditors. FICO scores typically range from 300 to 850. Your score will affect your credit or loan application approval and the terms and rates you’re offered. Note: FICO itself is not a credit reporting agency, but rather pulls information from one of the 3 credit bureaus (Experian, Equifax or Transunion).
How is a FICO® Score Calculated?
The creators of the FICO credit scoring model are rather tight-lipped about how their algorithm works. However, we do know the main factors that make up a FICO credit score profile. Here’s the breakdown:
What’s Not in My FICO Score?
There’s a lot that goes into calculating a FICO credit score. That said, FICO does not put any weight on non-financial data points. Such data points include: your race, religion, national origin, sex, marital status and age. Additionally, FICO does not consider any of the following when calculating your score:
- Whether or not a consumer has participated in a credit counseling program
- A consumer’s employment information, including your salary, occupation, title, employer, employment date or history
- Where a consumer lives
- The interest rates on a consumer’s credit accounts
- “Soft” credit inquiries. These are requests made by consumers to view their credit reports and scores
Some lenders and creditors run soft credit inquiries as well when determining your credit worthiness (which will not affect your credit score.) The FICO algorithm is still going strong and used by many top lenders and creditors to this day. However, many fintech companies are popping up and introducing their own credit scoring models.
What is a VantageScore?
VantageScore is used across all lending and credit providers, except for the mortgage industry. VantageScore is a collected effort between all three national credit reporting companies (CRCs)—Equifax, Experian and TransUnion. This model was introduced in 2006 and is a direct competitor of FICO. This model is gaining much traction amongst lenders and creditors. Over 10.5 billion VantageScore credit scores were used between July 2017 and June 2018 and more than 2,400 lenders consistently use it to gauge consumer credit worthiness.
It not only provides general scores to consumers, it also helps between 30 to 35 million adults build credit who otherwise may have bad credit (yet pays utility bills, etc on time) or simply have no credit at all. This makes it entirely possible for those consumers to have easier access to credit.
How is a VantageScore Calculated?
VantageScore uses a similar scoring rating as FICO, with a credit score range between 300-850. Similar to FICO, VantageScore looks at information from the credit bureaus such as: on-time payments, credit utilization, age of credit accounts, the type of accounts you have, and the number of inquiries you’ve made.
FICO and VantageScore both use the same basic criteria:
- Payment history
- Length of credit
- Types of credit
- Credit usage
- Recent inquiries
Although they both use the same criteria, they gather and analyze their data differently. FICO bases its scoring model on credit reports from millions of Americans. An accurate scoring model is generated by gathering information from all major credit bureaus and analyzing the reports’ of anonymous consumer data. VantageScore, on the other hand, uses a combined set of consumer credit files (obtained from the same credit bureaus) to come up with its score. FICO requires a minimum of 6 months of credit history before a you’ll see a score. VantageScore only requires one month of history. Because of this, VantageScore is able to issue credit scores to millions of consumers who don’t qualify for a FICO score. That said, checking your VantageScore may be more beneficial if you’ve recently started building your credit or simply haven’t had much credit activity within the last 6 months.
Where to Get Your Free Credit Score
Official Source: AnnualCreditReport.com
- Credit Karma
- Credit Sesame
- Mint.com
- Credit.com
- Bankrate
- Nerdwallet
- Wallethub
- Lendingtree
- LendingClub
- Discover Card
- Barclaycard
- Capital One Card
- American Express
- First Bankcard
- Walmart Credit Card
- Commerce Bank
- USAA Bank
- US Bank
- Chase
- Citi Bank
- Bank of America
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