Credit Score Range

Under the law, you are entitled to one free credit report a year, but just because you get the report does not mean you’ll get the score.

Credit reporting bureaus Equifax, Experian and TransUnion offer a free credit report per year, with other consumer reporting agencies that offer personal credit report via the Internet.

The report itself is actually just a compilation of a person’s credit history; allowing a person to closely monitor his or her past financial activity. Outstanding loans, current credit accounts, all appropriate balances and all payments made will be reflected in the report.

These companies, however, do not provide the credit score that serves as the basis for a lender’s decision to approve or deny financing. The credit score also affects the terms if the financing should be approved.

They will only release these ratings after a fee is paid, which is something that not many consumers are aware of. Many consumer reporting agencies don’t even have the courtesy of warning consumers that they will be charged when they get a score along with their report.

The credit report alone can be significantly useful – even if the score is not mixed in.

Consumers can use the report to gauge what positively or negatively affects their credit ratings, while errors and mistakes can be quickly spotted and corrected once the report is reviewed.

A credit score is a number assigned to an individual that shows his or her “creditworthiness.” Lenders use this score to predict whether an individual will regularly make payments on time or default on loan payments.

This 3-digit score is determined by your payment history, outstanding debt, length of credit history, new credit, credit inquiries from lenders and the type of credit you currently have. There are, however, different types of credit scores available on the market; each with its own interpretation of your credit history.

While the big three credit reporting agencies – Equifax, Experian and TransUnion – generally have similar methods of calculating credit score, they mostly operate independently of each other and receive their scores from different accounts. These agencies should ideally have very similar results as they use the same calculations, but differences do exist between these agencies.

For example, a person’s Equifax account may have details that his Experian account has not taken into consideration. This will have a definite impact on the overall credit scores provided by both Equifax and Experian.

The scores produced by these reporting agencies, however, are not the only scoring models that lenders use. FICO¹, NextGen, BEACON, VantageScore and EMPIRICA are some examples that provide alternative credit scores used by the financial services industry. They usually produce the same results, but the main reason why so many scores exist is because some data are cheaper to license than others.

Banks, credit card companies and other lenders may sometimes pick credit scores with lower licensing fees. This allows them to cut down on expenses without having to sacrifice their ability to assess the creditworthiness of a potential customer.

The different credit reporting agencies do, however, present varying ranges of scores. For example, FICO, Equifax and TransUnion scores range between 300-850, while Experian scores between 330-830 and VantageScore scores between 501-990. VantageScore also assigns a letter grade from A to F in order to give them a more unique appeal.

Update: FICO has updated its credit scoring model, named FICO 08² to better gauge (than the classic FICO) the likelihood that consumers will repay their credit bills; while still retaining the same numerical range (300 to 850). However, FICO 08 is only available to lenders and is not available yet for consumer purchase.

Despite the varying ranges of scores, there is actually no “best” or most reliable score to choose from. Credit reporting agencies will often tout their score as being the only reliable and most predictive score. The final output number of each agency may differ, but these agencies generally adhere to the same guidelines for calculating their scores. This essentially produces different types of scores that mean the same thing.

To sum the whole thing up, consumers need to focus only on the greater implications of their credit score and not the exact score itself. Paying dues on time and limiting debt to reasonable levels will help make a person’s varying credit scores more attractive in the eyes of lenders.

1. FICO is used in more than 75% of mortgage lending decisions and by 90% of the largest U.S. lenders. [↩]
2. Source: Understanding FICO 08 [↩]

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