How many types of credit scores are there? If you said one, you’d be wrong. If you said three, you’d still be wrong. There are actually more than 10 credit scores! Each one is used to estimate your creditworthiness within certain industries and situations.
1. VantageScore 3.0
VantageScore 3.0 is a joint effort developed by all three credit bureaus. It has the same credit score ranges as FICO does (300 to 850), but the calculation behind your score is completely different. So while it might be close to your FICO score, it’s not exact.
There’s more weight placed on your payment history and depth of credit compared to FICO. It also ignores collections accounts that have been paid. The calculation differences result in the average consumer VantageScore being 697 as of 2020.
You’ll find VantageScore 3.0 used in most free credit score apps like Credit Karma or Credit Sesame. However, it’s not used in most credit or lending decisions.
2. VantageScore 4.0
VantageScore 4.0 is the most recent credit scoring model from VantageScore. It analyzes consumer behaviors across time to predict the likelihood of defaulting on payment obligations and assigns credit risk.
The predictive modeling in VantageScore 4.0 tells a more complete story behind credit behavior rather than giving lenders a snapshot of your credit profile.
It also distributes more scores to consumers without credit scores under traditional models. This expansion on previous credit scoring models allows an additional 37 million people to be assigned a credit score.
3. FICO Score 8
FICO Score 8 was launched in 2009 and is currently the most widely used credit score to determine credit approvals. This score was designed to estimate a significant factor that lenders want to know–how likely it is for the applicant not to pay as agreed.
Most times this score is applicable for new credit card applications, student loans, retail credit, and personal loans. It’s also used by all three major credit bureaus (Experian, Equifax, and TransUnion) to furnish your official credit score.
The closer you get to a perfect 850 FICO score, the lower your credit risk is, and the more likely lenders are to approve you.
4. FICO Auto Score 8
When you’re shopping for a new car, there’s a different version of FICO that auto lenders use to determine your credit risk.
FICO Auto Score 8 is used by most auto-financing companies to assess your ability to meet payment obligations associated with a new car or auto refinance. This version of FICO is tuned to the specific needs and credit risks within the auto industry.
The big difference between this and FICO 8 is the credit score ranges. Instead of it being 300 to 850, the FICO Auto Score ranges from 250 to 900. Lenders decide which score to use, but your auto lender will likely use this in place of your base FICO 8 to determine industry-related risk.
5. FICO Bankcard Score 8
Credit card issuers use another type of FICO score designed to assess the credit risk of credit card and bank card applicants.
This is known as the FICO Bankcard Score 8. It’s designed specifically for credit card issuers with data points that support the repayment stats for that industry. It also has the same credit score ranges as the FICO Auto Score of 250 to 900.
This industry-specific score is often used in place of FICO 8, but again, the lender ultimately chooses which one to use for assessing credit risk.
6, 7 & 8. FICO Score 2, 4 & 5
Mortgage lenders rarely change which FICO scoring model they use, so you’ll likely find them using a much older version of FICO, such as FICO Score 2, 4, and 5. Traditionally, Experian uses version 2, Equifax reports version 5, and TransUnion reports version 4.
Whether you’re buying a new home or refinancing your existing home, the mortgage lender you go with will use one of these older FICO versions along with your other financial information to qualify you for a loan.
9. FICO Score 9
FICO Score 9 is a newer version compared to FICO 8. There are features to this version that make it friendlier for consumers. For example, paid-off third-party collections accounts are no longer factored into scores. Medical collections also have a lower impact.
A huge benefit for consumers is the consideration of rental reporting within the credit score. On previous FICO models, rental history isn’t accounted for and has no impact on your credit score. This allows previously unscored individuals to build credit history more easily.
10. FICO Score 10
This is the most recent version of FICO to be released. FICO Score 10 takes a similar approach to VantageScore 4.0 by using trended data to analyze consumer behaviors over extended periods.
It also considers the increased debt consolidation through the use of personal loans along with historical credit limits and balances. The combination of all this information determines the credit risk of each individual in a full-picture view.
This article originally appeared on DigitalHoney.com and was syndicated by MediaFeed.org.
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Does refinancing hurt your credit score?
Most people want to refinance their student loan to help their financial situation. So, the possibility of hurting your credit by going through the process of refinancing is alarming.
Fortunately, any harm done to your credit in applying should be pretty minor–and temporary. It’s just a part of going through obtaining a loan.
As for whether student loan refinancing will inflict any other kinds of damage to your credit, it definitely shouldn’t. To make sure your credit score is safe, learn more about how refinancing works and how you can best protect yourself.
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A credit score is the number assigned to you by any of the credit rating agencies. Those agencies include Experian, TransUnion, and Equifax.
Whenever someone looks at your score–a lender considering whether to give you a loan, a landlord deciding if you’d make a good tenant–they’ll see a number that tells them how good a risk you are. Credit scores are like a snapshot of your financial health.
If you have a good credit score, you’re going to get more green lights to what you want: a loan with low interest, an affordable car insurance policy, a high-limit credit card. On the flip side, if your score isn’t good, you’re going to be turned down for loans, lose out on homes and cars, and only be able to get high–interest credit cards.
Judgements vary, but anything 700 or above is considered a strong score. Your credit score is influenced by:
- On-time payments for bills
- Steady (but not excessive) use of credit
- History of paying balances in full
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It’s all about choices in paying off student loans. With student loan refinancing, you take your existing loan, one you’ve been paying down, and approach a private lender to ask for a new student loan. The goal is to get a better deal: lock into savings-producing lower interest rates, sign up with more favorable terms. The lender–a bank or other financial institution–basically buys the old loan and issues a new one with you.
Student loan debt has reached staggering amounts in the U.S.
Generally, people refinance a federal student loan issued while they were in college and take out a private loan with lower interest. It should be noted that with student loan refinancing, if you do so, you lose the protections of federal loan forgiveness and cancellation programs.
Damir Khabirov / istockphoto
So, to dig deeper into the question “Does refinancing student loans hurt your credit?” we’ll scrutinize the loan application process. The bank, credit union, or online lender you’ve gone to will perform what is known as a “hard credit check” when you apply for a loan. The intent is to see your number and the history behind the number.
Why does a hard credit check affect your number? After all, you didn’t do anything “wrong.” One explanation is that a hard inquiry means a lender is assessing your credit report and that creates uncertainty. You may be trying to get a personal loan, a student loan, or a mortgage. Something could be about to happen that could shake up your financial “health.”
simonapilolla / istockphoto
Sometimes this hard check doesn’t do anything to your credit. But other times the check will lower your credit score. How much? Occasionally as much as 10 points. More often 5 points or less. And fairly soon your score will return to where it was before the hard check.
The problem is if you submit multiple full applications for loans over the course of several months, your credit score could take a bigger hit. The reason is this suggests more volatility. So, if you put through these full applications over a long stretch of time, then the question of “Does refinancing student loans hurt credit?” carries the answer “Yes.”
There are proactive steps you can take to make sure your credit score makes it through the process in good shape.
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You can pre-qualify for a loan offer, and it won’t affect your score. Take advantage of that when you decide who you want to put in an application with. A full application is the only type that will nudge down your credit score. So try to submit to the lenders you consider your best options.
Also, and this is key, try to apply with your chosen few lenders for a student loan within the same month. That keeps the damage to your credit score to a minimum.
Note: Your FICO score won’t be significantly hurt by multiple inquiries if they occur within a 30-day window. Your Vantage credit score may have a shorter window of 14 days.
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When you’re trying to refinance, your money moves are under a spotlight. You need to be meticulous about continuing to make payments on your loan throughout the process. If you are late with a payment now, your credit score might suffer just when you want it to be perfect.
Keep on top of the payments for your original student loan until you are totally sure that the refinancing process is complete.
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When you analyze the question of whether refinancing student loans hurts your credit, you need to acknowledge the importance of making payments on time.
Yes, the application process could be finished, but any late payments will be reported to the credit agencies and lower your score. When choosing the terms of the loan–which is how long you will need to pay it off–make sure the repayment isn’t going to be too hard for you to cover. When refinancing, some people choose a shorter loan term and higher payments to get their loan over with. But the most important thing is making payments on time. Then refinancing is unlikely to hurt your credit.
Be sure to weigh this priority when you study the pros and cons of refinancing student loans.
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How will refinancing affect credit score? When you refinance your student loan, the private lender will do a hard check of your credit, which could cause a dip in your rating for a short time. If you apply to as few lenders as possible and keep it within a short time frame, that will minimize the chance of any credit damage. And be diligent in timely loan payments.
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This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)
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This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern and/or its network lenders conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Personal loan offers provided to customers on Lantern do not exceed 35.99% APR. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 05/01/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Life Insurance:
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
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fizkes / istockphoto
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