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You want to know your credit score, right? You know–THE Credit Score–as in, the one and only. As it turns out, that’s mostly a fantasy. There is no one credit score. In fact, each consumer has many.
You Have Many Different Credit Scores
Free credit scores are usually educational scores. These credit scores are designed to parallel lender credit scores. Free credit score providers can obtain these free. This is why you can get them for nothing.
But their main purpose is informational. They let you know approximately where your credit scores are without revealing the actual scores that lenders use. These credit scores are typically based on an approximation of the FICO scoring algorithm.
Many lenders will use official FICO or VantageScore scoring models, depending on their preferences and practices. Those credit scores may be slightly different from what you see as an educational score.
But even when it comes to official FICO scores, there’s still some room for mystery.
Surprise!–There’s More than One FICO Score
There are several FICO scores. FICO released the FICO Score 9 most recently. But many credit card lenders, in particular, still prefer the FICO Score 8. But FICO has several other scoring models, most of which are geared toward specific types of lending situations.
For example, the most common scores used in auto lending are FICO Auto Scores. The most common scores used for mortgage lending are FICO Scores 2, 4, and 5.
Credit card companies are the ones that use the biggest variety of FICO scores. Credit card issues may use the FICO Score 3, the FICO Bankcard Score 2, 4, or 5, or the FICO Bankcard Score 8.
Each of these models weights information in a slightly different way in an effort to get lenders the exact information they need. So they’re all important. But since credit card applications are probably the most often-used, the FICO 8 Bankcard Score–the most popular option for credit card issuers–is particularly important.
What is FICO 8 Bankcard Score?
Since FICO 8 Bankcard Score is specifically designed for credit card lenders, it uses credit criteria more conducive to that type of lending. For example, such a score might put more emphasis on your payment performance on credit cards than it does on mortgage loans, student loans, or auto loans.
It may also give greater weight to your credit utilization. After all, that particular credit criteria focuses specifically on credit cards. So it will carry greater weight with credit card lenders. A credit card lender would be more concerned that you are close to your credit limits than a mortgage lender or auto lender might be. These other lenders have the advantage of collateral to secure their loans.
This doesn’t mean that FICO ignore some credit categories in favor of others. They still provide a basic breakdown of the five factors that determine your credit score. On a broad level, these will hold true no matter which credit score you’re looking at. But each variety of your FICO score will give slightly more or less weight to certain indicators. This just helps make credit scores more useful for particular industry lenders.
Who Uses FICO 8 Bankcard Score and How is it Used?
As noted above, credit card companies are the primary users of the FICO 8 Bankcard Score. It is unlikely to be used by other types of lenders, due to the very specific nature of the scoring model.
The purpose of FICO 8 Bankcard Score, from a lender’s standpoint, is to predict performance specifically related to credit card loans. It gives greater weight to a borrower’s performance on credit cards than on other types of debt.
This isn’t to say all credit card lenders use FICO 8 Bankcard Score, or even a specific alternative. The credit card industry is highly decentralized. Each lender establishes its own guidelines. They can use any one of the wide variety of FICO scores or an alternative like the VantageScore or an in-house model.
If you’re looking to apply for a credit card, you can ask the creditor which score they use. Not all will provide this information, but it’s always worth asking.
How is FICO 8 Bankcard Score Different than Other FICO Scores
In addition to being slanted specifically toward credit card use, FICO 8 Bankcard Scores have a wider scoring range than other FICO scores. The range is between 250 and 900, compared to a range of 300 to 850 with the other scores.
There’s also a difference in the way FICO calculates these scores. As noted earlier, credit utilization ratio is given greater weight. It normally accounts for 30% of your credit score, and is second only to payment history in its contribution to your score. Under FICO 8 Bankcard Score, a high credit utilization ratio is more damning than it is for other FICO versions.
This makes sense with credit card use. A high ratio could be an indication that a borrower is having cash flow problems. This sends up a warning flag for potential credit card lenders. In the credit card universe, a high credit utilization ratio is a major predictor of default.
Ironically, FICO 8 Bankcard Score is less likely to penalize you for an isolated late payment. It will still have a negative impact, but not as much as it will with other FICO scoring models. Conversely, if you show a pattern of consistent late payments, even in the 30-day range, the negative impact is likely to be greater than it will be with the other scoring models.
Managing Your FICO 8 Bankcard Score
It’s natural for consumers to want to optimize their credit scores. If you want to do the same with FICO 8 Bankcard Score, perhaps because you frequently take advantage of new credit card deals, you’ll need to concentrate your efforts on those areas of your credit the scoring model specifically evaluates.
This will include making your payments on time, and, of course, keeping your credit score utilization ratio as low as possible.
Still another credit category to keep close control of is applying for new credit. If you are applying too frequently, it will have a greater negative weight than with other FICO scoring models. Credit card lenders may see it as a sign that you are looking for new credit anywhere you can find it.
Confused? It’s not just you. Credit scores aren’t as simple as we like to believe. FICO 8 Bankcard Score is just one example.