We have to give a lot of credit to U.S. News & World Report, for this new article that explains the differences between the various credit scoring models out there today.
Scoring models have evolved over time based on consumer behavior. “Going through the mortgage crisis and the economic downturn … Americans’ saving habits changed, and the way they use credit cards changed,” says Rod Griffin, director of public education at the credit bureau Experian. “As people change, scoring models change in order to continue to accurately reflect risk.”
Different scoring models weigh certain factors more heavily than others. FICO scores are used in 90 percent of lending decisions in the U.S., according to its website. The majority of those lenders use FICO 8, says Anthony Sprauve, senior consumer credit specialist at Fair Isaac Corporation, but some use previous versions.
While there are many different scoring models, the same principles for improving your credit score apply across the board. “What is far more important than the number itself is understanding what you need to do to make that number better,” Griffin says. “The scores may be different, but risk factors tend to be very consistent from one credit score to the next.”
Sprauve boils down credit improvement to three key steps. Pay all your bills on time, because payment history makes up 35 percent of your FICO score. Keep revolving balances low, ideally to 30 percent or less of your available credit, and only open new credit when you need it.
