If you’ve ever applied for a loan or credit, you are probably aware of the importance of your credit score –the three-digit number used to measure how likely you are to pay back what you borrow. What you may not be aware of is that you have multiple credit scores specific to different types of loans and credit.
FICO scores, the three-digit numbers ranging from 250 to 900 are named after the Fair Isaac Corp. that introduced them in 1989, are tabulated and maintained by multiple credit-reporting agencies. The three biggest are Equifax, Experian and TransUnion. Because of the broad range of the loans and credit that exist, lenders can access industry specific FICO scores tailored to their specific type of lending by putting more weight on any comparable borrowing you’ve done in the past, or the fact that you may not have a track record for similar borrowing. There are roughly 50 different types of FICO scores. That doesn’t take into account certain banks or lenders which rely on a combination of scores to measure a potential borrower’s creditworthiness.
If you are in the market for a new car and you plan to take out an auto loan, lenders will pull an auto-specific FICO score based on your payment history with any previous types of auto financing. This includes factors such as do you pay more than the minimum amount required on revolving credit lines and whether your credit card balances and your overall credit utilization are rising or decreasing. 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 a request to the three major credit-rating services, since many banks and lenders 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, first 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. Knowing what your FICO score is for any specific type of loan will allow you to do comparison shopping of interest rates before committing to any particular lender and help you avoid unpleasant surprises if your industry-specific score differs significantly from the general score you will receive from each of the three main credit rating services or the paid credit score services that now exist online.