Which Credit Score Do Lenders Actually Use?

Posted by Nikitas Tsoukalis on February 8, 2017

Which Credit Score Do Lenders Actually Use?

If you’ve ever applied for a car loan, mortgage or credit card before, then you know that part of the process involves the respective lender checking your credit score. Credit checks are crucial anytime you’re requesting to borrow money, as they help lenders determine whether or not you’re an at-risk consumer.
Which Credit Score Do Lenders Actually Use?
But what you might not know is that there’s more than one credit score that lenders can check to determine your risk. This is largely because there are three main credit bureaus that report your credit information – TransUnion, Equifax and Experior – and each of these bureaus use different models. So what credit score do lenders actually use? Let’s examine:

The Most Popular Credit Score

According to a report in Fair Isaac, an overwhelming majority – about 90 percent – of the top lenders in the United States use the FICO score to determine consumer risk. But noting this, it’s important to keep certain things in mind when it comes to the FICO score – there are more than 60 different types of it, so one FICO scoring formula may not necessarily come up with the same number as another scoring formula.

The report goes on to state that the most popular FICO score used is FICO Score 8. Mortgage lenders typically use FICO Scores 5, 2 and 4 when determining whether or not to approve a loan. Additionally, one type of credit score to keep an eye on moving forward is the VantageScore, a score that was developed by the three main credit bureaus and currently serves as a competitor to FICO. There’s some speculation that VantageScore will continue to gain traction in the future. VANTAGE 3.0 is the latest score from this family of credit scores.

What’s the Difference Between Scores?

In reality, the scoring formulas are pretty universally similar, but many of the formulas are designed to more closely analyze different things. Typically, the type of lender will depict what type of score – or scores – will be looked at. For instance, an auto lender will want to see data on whether you paid on time and in full when it comes to any past auto loans that were in your name.

With that being said, the issue shouldn’t be so much worrying about what credit score a lender is going to check, but whether your credit is in good shape to begin with. If it’s not, there are a number of credit repair tactics you can enact to get your score where it needs to be, whether you’re looking to get into the range of acceptance on a loan or whether you want to get it into the range that will qualify you for the lowest offered interest rates. Here’s a look at some credit repair tips:

  • Pay off high-interest debts first.
  • Keep your debt-to-credit ratio at or below 30 percent.
  • Pay all bills on time and in full.
  • Check your credit report at least once a year to ensure its accuracy. Dispute any inaccuracies accordingly.