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Your credit score: 3 surprising facts you should know

by Barbara Marquand

Learning your credit score helps you gauge where you stand with lenders and credit card companies, which is a good step to take before you shop for credit. But credit scoring is fairly complicated, and misunderstandings abound. Here are three surprising facts you should know to interpret your credit score.

1. Scoring models are geared to produce different results

Your credit score is often touted as one absolute number that grades your credit. But you can have many different credit scores. Experian, one of the major U.S. credit reporting bureaus, says some estimates peg the number of credit scoring models at more than 1,000. The scoring models used most by creditors are the FICO credit score, developed by the Fair Isaac Corporation, and the VantageScore, developed by Experian, Equifax, and Transunion. Sometimes lenders use their own proprietary credit scoring models.

Even the same credit scoring model has variations. Fair Isaac developed three FICO score models, one for each of the three credit bureaus. Although the models are very similar, they can produce slightly different results using the same information. In addition, not all the information reported about you to one credit bureau is reported to another, so your FICO score could vary according to which credit bureau is doing the calculations.

2. Credit score ranges are not universal

Different scoring models use different ranges, so whether your number is considered good depends on which formula is used.

VantageScores range from 501 to 990, and the breakdown of excellent to bad credit is similar to the scale used to calculate grades in school -- 900 to 990 is excellent; 800 to 899 is good; 700 to 799 is fair; 600 to 699 is poor; and under 600 is very poor.

FICO credit scores range from 300 to 850, with the top 20 percent of consumers above 780.

Knowing the scoring range is critical for interpreting your number. A 782 FICO score is excellent -- usually enough to qualify you for the best credit card rates -- but a 782 VantageScore is about average.

3. Credit scores sold to lenders may differ from what you see

Because there are so many different credit score models on the market, you should know what you're buying when you pay for your credit score. Be aware that some of the scores sold are based on models not used by lenders or credit card companies.

Don't be surprised if your credit score changes from month to month. New information is added to your credit reports all the time. Each time your score is calculated, the number is based on the latest information.

Published 09/20/12 (Modified 11/20/13)


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