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You already know that your credit score is a major index most lenders use to determine their risk in lending to you. Your scores are computed from many different bits of data in your credit report - including payment history and outstanding balances. Scores range from 300 to 850, with higher scores indicating better credit histories. The measurement of 620 is the dividing line between prime credit and. Keep in mind that prime credit means lower interest rate, while sub-prime credit causes much higher rates. The difference between a good credit score and a sub-prime one might mean hundreds of dollars in costs every month.

You should be aware that there are two main sorts of credit scores -; FICO Beacon Score and Vantage Credit Score. It is essential to understand how they work, since this knowledge has a positive impact on your credit history. To distinguish between a FICO score and a Vantage we should understand how they are computed. As a rule, a FICO score is computed in the following way:

  • 35% based upon your payment history. Recent payment patterns have a greater bearing on your FICO scores than past credit history.
  • 30% based upon the amount of your outstanding debts.
  • 15% based upon length of payment history. The longer your history is the better score you have.
  • 10% based upon recent inquiries, with the fewer inquires meaning the better score.
  • 10% based upon your credit diversity. The more diversified (car loan, mortgage, cards, etc) the better.

While the FICO score remains the most popular, the Vantage is working up the market. Three major credit-reporting agencies developed the Vantage Credit Score to see your creditworthiness more clearly. The typical Vantage Credit Score rating will range from 501-990. It issues a letter grade to the measurement. The following are the components of the Vantage helping you to distinguish between Vantage and FICO:

  • 32% based upon your payment history (as with FICO).
  • 23% based upon total credit available.
  • 15% based upon the portion of your score contributed by the debts you are carrying.
  • 13% based upon your credit mix and the length of the repayments.
  • 10% based upon the number of recently opened accounts and number of recent inquires.
  • 7% based upon the total potential amounts of dollarsyou could use.

Above the differences in computing the Vantage score and the FICO score were shown. This information may be instrumental for you in making better credit decisions and in such a way maintaining an excellent credit rating. The terms FICO Beacon score and credit score used to be applied interchangeably. Nowadays, it is the Vantage score that is gaining ground.

 
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