Credit Scores

What is a credit score?
Credit score is basically a rating that shows how likely you are to pay back your debt (mortgage, auto loan, credit card, etc)

Who is using credit scores?
Companies that lend money to consumers.

Types of credit scores

FICO score - the most known, established and widely used credit score. It's developed by Fair Isaac company and ranges from 300 (highest risk of payment default) to 850 (lowest risk). When people talk about subprime population it generally means FICO score below 660. You can get your score at http://www.myfico.com/. The higher your score is the higher loan amount (or credit card line) and lower interest rate you will get.

Vantage Score - this is a new score that was developed by three major consumer bureaus - Experian, Equifax and TransUnion. The score is believed to outperform FICO, however the lenders are not using it (yet) as widely. Vantage score has a different scale compared to FICO - from 501(highest risk) to 990 (lowest risk). You can find more details at http://www.vantagescore.com/. You can get your Vantage Score through one of the consumer bureaus, for example Experian at http://www.experian.com/

Both FICO and Vantage score are so-called traditional scores that rely on individual's credit history. However, not all adults in this country have one (new immigrants, for example wouldn't have it or it would be too thin to reliably assess level of risk), so to serve this segment of customers the non-traditional scores were developed (using utility, cell phone payments, public records, address stability, etc.). Lexis Nexis' RiskView score is one of such scores.

How to improve your score?

This way or another the scores are using:

- Your payment patterns, so make sure you pay all your bills (including utility, medical bills etc.) on time!
- Utilization - ratio of the balance you owe to total credit limit. The higher it is the lower your score will be, so try not to revolve balances on your credit cards (pay balance in full if possible)
- Length of credit history - don't close your oldest credit card
- New inquiries - try not to apply for credit too many times in a short period of time

Please let me know if you have any questions!!

Vitaly