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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Do you know about your multiple different credit scores? A lot of people do not realize that you have different credit scores that are specific to different types of loans. Why You Should Access an Industry Specific FICO Score Before Borrowing By Britt Erica Tunick If you’ve ever applied for any kind of loan or credit you are probably already aware of the importance of your credit score the three-digit number used to measure how likely you are to pay back what you are borrowing. But what you may not be aware of is that you actually have multiple credit scores that are specific to different types of loans and credit. FICO scores, the three-digit numbers ranging from 250 to 900 that are named after the Fair Isaac Corp. that first introduced them in 1989, are today tabulated and maintained by multiple credit reporting agencies the three biggest being Equifax, Experian and TransUnion. Because of the broad range of the types of loans and credit that exist, lenders are able to access industry specific FICO scores that are catered to their specific type of lending by putting more weight on any comparable borrowing you’ve done in the past, or even the fact that you may not have a track record for similar borrowing. As a result, there are roughly 50 different types of FICO scores and that doesn’t even take into account the fact that certain banks or lenders rely on a combination of scores to measure a potential borrower’s credit worthiness. For example, if you are in the market for a new car and are looking at taking out an auto loan lenders will pull an auto-specific FICO score that is based on your payment history with any previous types of auto financing, as well as factors such as whether or not you pay more than the minimum amount required on revolving credit lines and whether or not your credit card balances and your overall credit utilization are rising or decreasing. Whereas, a mortgage specific FICO score may look at all of these things but will pay particularly close attention to your past use of financing companies for everything from previous mortgages to department store issued credit cards. Fortunately for borrowers, getting access to your FICO scores no longer requires sending off a request to the three major credit rating services, as many banks and lenders will now provide your score for free. Though banks have always had access to these numbers, in 2013 FICO began pairing with different credit card issuers to provide people with free copies of their FICO scores and since then the number of banks and lenders that offer free scores has grown significantly. If your future plans include applying for a new credit card or loan, before doing so check with the lender you plan to apply with, or a comparable institution, to see if you can get a free copy of your FICO score first. Knowing what your FICO score is for any specific type of loan will allow you to do some comparison shopping of interest rates before committing to any particular lender and can help you avoid any unpleasant surprises should your industry specific score different significantly from the general score you will receive from each of the three main credit rating services, or even many of the paid credit score services that now exist online. |
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