It’s worth noting that this scale only includes those with sufficient credit histories to receive a score at all. The higher the score, the greater the chance a borrower will pay his or her debt. Here’s where the headaches start, though: Your score will differ depending on which company is running the numbers, and both have a variety of scoring models geared toward particular types of loans.Ĭurrently, FICO and VantageScore employ a scale ranging from 300 to 850. These companies put people’s financial data through their proprietary algorithms, producing the single number that forms your score. Virtually all credit reports rely on one of two providers: FICO or VantageScore (with the large majority of lenders using FICO). That’s why businesses use them in their lending decisions: They’re making an educated bet on whether they’ll get their money back. In basic terms, credit scores measure how likely you are to repay a loan. The only difference is that some of the calculations used to tabulate those scores are being modified. The credit score ranges, as shown below, will remain the same. Let's talk about what it could mean to you. FICO claims this could mean a 20-point increase for people with credit scores above 680, but people who are struggling may see ever sharper dips for missed payments and high balances. From the loans you can get to the interest rates you’ll pay, the financial implications of your score are hard to overstate.Īnd just recently, the news broke that the calculation used to determine FICO scores is changing, with a heavier emphasis on overall debt load, payment history, and types of debt. When it comes to personal finance, it’s hard to find a number that’s more important than your credit score.
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