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A lot of borrowers know they’re going to get a credit check when they apply for a loan, and check their credit score beforehand to make sure they know what their lender will be looking at as well. But how do they know which credit score their lender is using? The truth is they don’t.

Nearly 30% of lenders said they use more than one credit score when evaluating borrowers, according to a survey by VantageScore Solutions. Even more lenders (69% of those surveyed) expressed a desire to access credit score models from multiple, qualified developers

There is no ultimate credit score, meaning the most important score is the one used to help determine approval for whatever loan you want.

Here’s the thing — you’re not going to know ahead of time which scoring models your potential lenders are using. Rather than focus on getting a score of yours to a particular number, you should focus on the underlying factors on which credit scores are based.

Knowing the Score

If you’re familiar with credit scores, you’ve probably heard of FICO. They’ve been in the credit-scoring business for decades, and their models are widely used. Still, there are roughly 50 different FICO scoring models, and there are dozens of other models out there being used by lenders all the time. The VantageScore models, for example, were created jointly by the major credit reporting agencies (Equifax, Experian and TransUnion).

Then there are proprietary scores, meaning lenders create their own scoring models for evaluating the consumers’ creditworthiness. The point is you have many credit scores, one or several of which can be used in a lending decision. So what can you do to know where you stand before you apply for credit?

Develop a Credit Strategy

Because you won’t know which scoring model (or models) are playing a role in your loan application, the best thing you can do is make sure your credit history is in its best shape possible before applying. Credit scores can be helpful to monitor your progress.

Credit scores are based on your credit reports, meaning scores will reflect changes in your history. If you compare the same scoring model over the course of several months, you will see the number go up and down in relation to how high your credit card balances are, how often you apply for credit, whether you make loan payments on time and if you add to your debt or available credit.

Comparing different scores (like a FICO and a VantageScore) won’t really tell you anything, because they’re using different models. It’s like comparing apples to oranges. But following the progress of one score, you’ll start to see how your financial behavior impacts your credit score.

There are five main factors that determine your credit score, and even though they’re weighed differently by various scoring models, you should focus on improving and maintaining them all. If you’re curious about how well you perform in these five areas, you can get a breakdown of your credit strengths and weaknesses, plus free credit scores with your Credit.com account. Once you identify your weak points, you can make a plan to address them.

More on Credit Scores:

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  • credit101

    One of the best pieces I’ve seen on a subject that is not as simple as some would make it out to be. DiGangi does a great job of laying out the fact there are different score models and they are predicated on an individual’s credit report. Because of this, credit reports are a valuable resource for consumers in trying to determine their credit profile. That’s why CDIA continues to encourage consumers to go to http://www.annualcreditreport.com and get a free copy of their credit report.
    Norm Magnuson
    Vice President of Public Affairs
    Consumer Data Industry Association
    Washington, DC

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