Your 780 credit score might not be as great as you think it is. It all depends on which score you’re talking about.
If you’re referring to a FICO score of 780 out of 850, that’s excellent — but 780 is quite mediocre on the VantageScore model, which tops out at 990.
The eight most common credit scores used by lenders and consumers range from as low as 150 to as high as 990. The most commonly used credit score (used by 90 percent of lenders and others who use credit scoring) is your FICO score (MyFico.com). Then the three major credit bureaus, Trans- Union, Experian and Equifax each have their own scores. TransUnion’s TransRisk score ranges from 300 to 850, and the Equifax Credit Score ranges from 280 to 850. Meanwhile, one of Experian’s scores ranges from 360 to 840, while another goes from 330 to 830. And then there’s the score the bureaus created together — the VantageScore — which ranges from 501 to 990.
Confused? Don’t be. Credit scores are like body weight. You can weigh yourself 10 times a day, and that’s not going to change a thing. Instead of becoming a slave to the bathroom’s scale, eat better and exercise more, and your weight will take care of itself.
Your credit score is a direct reflection of the way you manage your credit and financial life. Don’t obsess over your credit scores. Concentrate your efforts on the following simple steps to improve your money management skills, and your credit scores (all of them!) will begin to soar.
PAY YOUR BILLS ON TIME: Just do it. Late payers suffer greatly with low credit scores because low scores translate to having to pay higher insurance premiums, and higher interest rates on mortgages and car loans, and perhaps missing out on that great job or apartment. Your credit history matters!
CHECK YOUR REPORTS: Do not confuse credit reports with credit scores. Your credit reports are the blueprints to your credit scores. If there’s an error on a report, that could severely affect its score. You can get one free copy of each of your big three credit reports every 12 months.
Take full advantage of this by going to AnnualCreditReport.com. Follow the prompts, but do not be sidetracked into paying for anything. Check your reports carefully, and dispute any items that you do not know to be factually correct.
GET YOUR UTILIZATION RATE UNDER 30 PERCENT: This is the ratio between your credit limit(s) and the amount of debt you are carrying.
If you have a credit card with $2,000 limit, you should not be using more than $600 (30 percent) of it at any time. If all of your credit cards together total $15,000 credit limit, all of your credit card debt should not exceed $3,000. If you’re over, do everything you can to get below 30 percent utilization.
Then go for the gold by paying them all off to achieve $0 balances across the board.
Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website. You can email her at firstname.lastname@example.org, or write to Everyday Cheap skate, P.O. Box 2099, Cypress, CA 90630.
To find out more about Mary Hunt and read her past columns, please visit the Creators webpage at www.creators.com.