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# How Credit Score Works

Your credit score is used by lenders so that they can easily assess the potential risk that they would be taking on by giving you a loan.

It’s important financial information to have. But did you know there are actually multiple answers and no single way of calculating a credit score?

It is presented as a number from 300-850 so that it is easy to understand. The higher your credit score, the better it is.

The two most common ways of estimating it are the FICO Score and the VantageScore. In this post, I’ll detail the differences between the two, and how those variables could impact your pursuit of good credit.

## Credit Score Ranges

The latest version of VantageScore, which is called VantageScore 4.0 and was launched in 2017, uses the same 300 – 850 range used by FICO. The credit tiers within that range are as follows:

• 781 – 850 = Super Prime
• 661 – 780 = Prime
• 601 – 660 = Near Prime
• 500 – 600 = Subprime
• 300 – 499 = Deep Subprime

Earlier versions of VantageScore used a range from 501 – 990 so if you are ever doing more research and come across this scale, that is why.

Of course, you don’t need a perfect score to access credit at the best terms and lowest interest rates. In fact, according to Experian, only 1.2% of Americans have a credit score of 850.

In most cases, scores above 700 are considered good. And as a practical matter, lenders don’t typically distinguish between scores that are in the “exceptional” range of 800 to 850.

## Credit Score Calculation

Up until this point in the post, FICO and VantageScore have had the same properties but this is where the difference comes in.

Both FICO and VantageScore use 5 factors when calculating your score. In FICO, the factors are listed based on how much they are weighted shown as a percentage whereas in VantageScore the factors are listed based on how influential they are when calculating your score.

### FICO Score

• 35% payment history
• 30% level of debt/amounts owed
• 15% age/length of credit history
• 10% types of credit/credit mix
• 10% credit inquiries/new credit

### VantageScore 4.0

• Extremely influential: total credit usage, balance, and available credit
• Highly influential: credit mix and experience
• Moderately influential: payment history
• Less influential: age of credit history
• Less influential: new accounts

As you can see, both methods use similar factors when calculating your credit score however how much each factor influences your score differs.

## What The Scores Don’t Consider

FICO says its score doesn’t take into consideration your race, color, religion, national origin, sex, marital status, your age, salary, occupation, employment history, where you live and the interest rate you’re being charged on a credit card or other account.

They also exclude child or family support payments you are obligated to make and do not change your score based on requests for a credit report by yourself, an employer, or a lender for the purpose of making a promotional offer or a periodic review. It also doesn’t consider whether you are using the services of a credit counselor.

VantageScore’s website says it doesn’t take your race, color, religion, nationality, gender, marital status, age, salary, occupation, title, employer, employment history, total assets, or where you live into account when calculating your score.

## Do Lenders Use FICO or VantageScore?

FICO is the more widely-used credit scoring model. But, lenders are starting to use both scoring services to get a better sense of consumer credit histories and potential risks. While 90 percent of lenders are still using FICO Scores, VantageScore has been gaining significant ground.

## How To Get Your Credit Score

There are many scams out there claiming to provide your credit score but they end up stealing your credit card and other sensitive information.

There are three main credit bureaus: Experian, Equifax and TransUnion. A credit bureau is a credit reporting agency that aggregates information about your credit history into a credit report.

All three bureaus may provide slightly different scores however they will be in the same general range.

Both FICO and VantageScore provide you your score in slightly different ways. Below are some safe and trusted ways to get both of your scores.

### FICO

You have several options here. The first is to check your credit card statement, as some issuers (Bank of America, Discover and Citibank, for example) offer their customers their FICO Scores every month for free.

The easiest way is to get your score from an authorized FICO score retailer. They are Experian, Equifax, and MyFico.

### VantageScore

Similar to FICO, there are several different ways that you can get your score.

The first is through your financial institution. Many offer your score for free each month, including Chase Bank, Capital One or OneMain Financial (provided by TransUnion), and U.S. Bank (provided by Experian).

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