Average Credit Score in America Reaches New Peak at 699

In late 2016, American consumers hit an important milestone. For the first time in a decade, over half of American consumers (51%) recorded prime credit scores. On the other side of the scale, less than a third of consumers (32%) suffered from subprime scores.1 As a nation, our average FICO® credit score rose to its highest point ever, 699.2

Despite the rosy national picture, we see regional and age-based disparities. A minority of Southerners still rank below prime credit. In contrast, credit scores in the upper Midwest rank well above the national average. Younger consumers struggle with their credit, but boomers and the Silent Generation secured scores well above the national average.

In a new report on credit scores in America, MagnifyMoney analyzed trends in credit scores. The trends offer insight into how Americans fare with their credit health.

Key Insights:

  1. National average FICO® credit scores are up 13 points since October 2009.3
  2. 51% of consumers have prime credit scores, up from 48.1% in 2007.4
  3. One-third of customers have at least one severely delinquent (90+ days past due) account on their credit report.5
  4. Average Vantage® credit scores in the Deep South are 21 points lower than the national average (652 vs. 673).6
  5. Millennials’ average Vantage® credit score (634) underperformed the national average by 39 points. Only Gen Z has a lower average score (631).7

Credit Scores in America

Average FICO® Score: 6998

Average Vantage® Score: 6739

Percent with prime credit score: 51%10

Percent with subprime credit score: 32%11

Credit Score Factors

Percent with at least one delinquency: 32%12

Average number of late payments per month: .3513

Average credit utilization ratio: 30%14

Percent severely delinquent debt: 3.37%15

Percent severely delinquent debt excluding mortgages: 6.9%16

The Big 3 Credit Scores

Credit scoring companies analyze consumer credit reports. They glean data from the reports and create algorithms that determine consumer borrowing risk. A credit score is a number that represents the risk profile of a borrower. Credit scores influence a bank’s decisions to lend money to consumers. People with high credit scores will find the most attractive borrowing rates because that signals to lenders that they are less risky. Those with low credit scores will struggle to find credit at all.

Banks have hundreds of proprietary credit scoring algorithms. In this article, we analyzed trends on three of the most famous credit scoring algorithms:

  1. FICO® 8 Credit Score (used for underwriting mortgages)
  2. Vantage® 3.0 Credit Score (widely available to consumers)
  3. Equifax Consumer Risk Credit Score (used by the Federal Reserve Bank of New York)

Each of these credit scores ranks risk on a scale of 300-850.

In all three models, prime credit is any score above 720.

Subprime credit is any score below 660. All three models consider similar data when they create credit risk profiles. The most common factors include:

  1. Payment history
  2. Revolving debt levels (or revolving debt utilization ratios)
  3. Length of credit history
  4. Number of recent credit inquires
  5. Variety of credit (installment and revolving)

However, each model weights the information differently. This means that a FICO® Score cannot be compared directly to a Vantage® Score or an Equifax Risk Score.

American Credit Scores over Time

Average FICO® Credit Scores in America are on the rise for the eighth straight year. The average credit score in America is now 699.

We’re also seeing healthy increases in prime credit scores. In the three major credit scoring models, a prime credit score is any score above 720.

According to the Federal Reserve Bank of New York, 51% of all Americans have prime credit scores as measured by the Equifax Risk Score. Following the housing market crash in 2010, just 48.4% of Americans had prime credit scores.20

Credit Scores and Loan Originations

Following the 2007-2008 implosion of the housing market, banks saw mortgage borrowers defaulting at a higher rates than ever before. In addition to higher mortgage default rates, the market downturn led to higher default rates across all types of consumer loans.

To maintain profitability banks began tightening lending practices. More stringent lending standards made it tough for anyone with poor credit to get a loan at a reasonable rate.

Although banks have loosened lending somewhat in the last two years, people with subprime credit will continue to struggle to get loans. In February 2017, banks rejected 85% of all credit applications from people with Equifax Risk Scores below 680. By contrast, banks rejected 8.74% of credit applications from those with credit scores above 760.22

Credit Scores and Mortgage Origination

Before 2008, the median homebuyer had an Equifax Risk Score of 720. In 2017, the median score was 764, a full 44 points higher than the pre-bubble scores. The bottom tenth of buyers had a score of 657, a massive 65 point growth over the pre-recession average.23

Some below prime borrowers still get mortgages. But banks no longer underwrite mortgages for deep subprime borrowers. More stringent lending standards have resulted in near all-time lows in mortgage foreclosures.

Credit Scores and Auto Loan Origination

The subprime lending bubble didn’t directly influence the auto loan market, but banks increased their lending standards for auto loans, too. Before 2008, the median credit score for people originating auto loans was 682. By the first quarter of 2017, the median score for auto borrowers was 706.26

In the case of auto loans, the lower median risk profile hasn’t paid off for banks. In the first quarter of 2017, $8.27 billion dollars of auto loans fell into severely delinquent status. That means the owners of vehicles did not pay on their loans for at least 90 days. Auto delinquencies are now as bad as they were in 2008.28

Consumers looking for new auto loans should expect more stringent lending standards in coming months. This means it’s more important than ever for Americans to grow their credit score.

Credit Scores for Credit Cards

Unlike other types of credit, even people with deep subprime credit scores usually qualify to open a secured credit card. However, credit card use among people with poor credit scores is still near an all-time low. In the last decade, credit card use among deep subprime borrowers fell 16.7%. Today, just over 50% of deep subprime borrowers have credit card accounts.30

The dramatic decline came between 2009 and 2011. During this period, half or more of all credit card account closures came from borrowers with below prime credit scores. More than one-third of all closures came from deep subprime consumers.

However, banks are showing an increased willingness to allow customers with poor credit to open credit card accounts. In 2015, more than 60% of all new credit card accounts went to borrowers with subprime credit. 25% of all the accounts went to borrowers with deep subprime credit.

State Level Credit Scores

Consumers across the nation are seeing higher credit scores, but regional variations persist. People living in the Deep South and Southwest have lower credit scores than the rest of the nation. States in the Deep South have an average Vantage® credit score of 652 compared to a nationwide average of 673. Southwestern states have an average score of 658.

States in the Upper Midwest outperform the nation as a whole. These states had average Vantage® Scores of 689.

Unsurprisingly, consumers across the southern United States are far more likely to have subprime credit scores than consumers across the north. Minnesota had the fewest subprime consumers. In December 2016, just 21.9% of residents fell below an Equifax Risk Score of 660. Mississippi had the worst subprime rate in the nation. 48.3% of Mississippi residents had credit scores below 660 in December 2016.35

These are the distributions of Equifax Risk Scores by state:37

Credit Score by Age

In general, older consumers have higher credit scores than younger generations. Credit scoring models consider consumers with longer credit histories less risky than those with short credit histories. The Silent Generation and boomers enjoy higher credit scores due to long credit histories. However, these generations show better credit behavior, too. Their revolving credit utilization rates are lower than younger generations. They are less likely to have a severely delinquent credit item on their credit report.

Gen X and millennials have almost identical revolving utilization ratios and delinquency rates. Compared to millennials, Gen X has higher credit card balances and more debt. Still, Gen X’s longer credit history gives them a 21 point advantage over millennials on average.

To improve their credit scores, millennials and Gen X need to focus on timely payments. On-time payments and lower credit card utilization will drive their scores up.

A report by FICO® showed that younger consumers can earn high credit scores with excellent credit behavior. 93% of consumers with credit scores between 750 and 799 who were under age 29 never had a late payment on the credit report. In contrast, 57% of the total population had at least one delinquency. This good credit group also used less of their available credit. They had an average revolving credit utilization ratio of 6%. The nation as a whole had a utilization ratio of 15%.39

Sources

  1. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  2. Ethan Dornhelm, “US Credit Quality Rising … The Beat Goes On,” Fair Isaac Corporation. Accessed May 24, 2017.
  3. Ethan Dornhelm, “US Credit Quality Rising … The Beat Goes On,” Fair Isaac Corporation. Accessed May 24, 2017.
  4. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  5. 2016 State of Credit Report” National 2016 90+ Days Past Due, Experian, Accessed May 24, 2017
  6. 2016 State of Credit Report” State 2016 Average Vantage® Credit Score, Experian. Accessed May 24, 2017.
  7. 2016 State of Credit Report” National 2016 Average Vantage® Credit Score, Experian. Accessed May 24, 2017.
  8. Ethan Dornhelm, “US Credit Quality Rising … The Beat Goes On,” Fair Isaac Corporation. Accessed May 24, 2017.
  9. 2016 State of Credit Report” National 2016 Average Vantage® Credit Score, Experian. Accessed May 24, 2017.
  10. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  11. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  12. 2016 State of Credit Report” National 2016 90+ Days Past Due, Experian. Accessed May 24, 2017.
  13. 2016 State of Credit Report” National 2016 Average Late Payments, Experian. Accessed May 24, 2017.
  14. 2016 State of Credit Report” National 2016 Average Revolving Credit Utilization Ratio, Experian. Accessed May 24, 2017.
  15. Quarterly Report on Household Debt and Credit May 2017” Percent of Balance 90+ Days Delinquent by Loan Type, All Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  16. Calculated metric using data from “Quarterly Report on Household Debt and Credit May 2017” Percent of Balance 90+ Days Delinquent by Loan Type and Total Debt Balance and Its Composition. All Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.Multiply all debt balances by percent of balance 90 days delinquent for Q1 2017, and summarize all delinquent balances. Total delinquent balance for non-mortgage debt = $284 billion. Total non-mortgage debt balance = $4.1 trillion $284 billion /$4.1 trillion = 6.9%.
  17. 2016 State of Credit Report” State 2016 Average Vantage® Credit Score, Experian. Accessed May 24, 2017.
  18. Ethan Dornhelm, “US Credit Quality Rising … The Beat Goes On,” Fair Isaac Corporation. Accessed May 24, 2017.
  19. Ethan Dornhelm, “US Credit Quality Rising … The Beat Goes On,” Fair Isaac Corporation. Accessed May 24, 2017.
  20. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  21. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  22. Survey of Consumer Expectations, © 2013-2017 Federal Reserve Bank of New York (FRBNY). The SCE data are available without charge at http://www.newyorkfed.org/microeconomics/sce and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.
  23. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Mortgages, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  24. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Mortgages, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  25. Quarterly Report on Household Debt and Credit May 2017” Number of Consumers with New Foreclosures and Bankruptcies, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  26. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  27. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  28. Quarterly Report on Household Debt and Credit May 2017” Flow into Severe Delinquency (90+) by Loan Type, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  29. Quarterly Report on Household Debt and Credit May 2017” Flow into Severe Delinquency (90+) by Loan Type, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  30. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed May 24, 2017.
  31. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed May 24, 2017.
  32. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed May 24, 2017.
  33. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed May 24, 2017.
  34. 2016 State of Credit Report” State 2016 Average Vantage® Credit Score, Experian. Accessed May 24, 2017.
  35. 2016 State of Credit Report” State 2016 Average Vantage® Credit Score, Experian. Accessed May 24, 2017.
  36. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  37. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  38. 2016 State of Credit Report” National 2016 Vantage® Credit Score, Experian. Accessed May 24, 2017.
  39. Ethan Dornhelm, “US Credit Quality Rising … The Beat Goes On,” Fair Isaac Corporation. Accessed May 24, 2017.

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A New Credit Scoring Model Is On the Way: Here’s What to Expect

VantageScore is rolling out a new version of its credit score model this fall.

A new credit scoring model — expected to roll out in fall 2017 — aims to more accurately measure credit risk by using more historical data and machine-learning techniques while culling less reliable information.

On Monday, VantageScore Solutions announced the release of the fourth version of its credit scoring model, to be used by the three national credit bureaus. (It may seem like these credit scoring models don’t change much, but they do update from time to time. You can find out 13 ways credit scores have changed in the past 20 years here.)

VantageScore 4.0 improves on its predecessor in three main ways, said Sarah Davies, senior vice president of product management and analytics for VantageScore. First, it looks at a consumer’s credit behavior over time, incorporating more of what’s known as “trended data.”

For example, the score takes into account how a consumer’s credit balance has changed over a period of months, rather than taking a single snapshot in time. This has made the score upwards of 20% more predictive than 3.0 for customers with good credit, Davies said.

The new model also excludes a lot of public record information, especially liens and judgments. In many cases, Davies said, this information was difficult to accurately link to individual consumers.

“In all likelihood, almost all civil judgments will be removed from credit files and a substantial portion of tax liens will be removed from credit files,” Davies said.

With this new model, medical collections won’t be reported on credit files until after six months have passed. That’s because there is often confusion as to whether the consumer or insurer is responsible for the payment, Davies said.

The third big update is the use of machine-learning techniques to help score consumers with thin credit files. VantageScore used large data-processing platforms to examine thousands and thousands of combinations of consumer behaviors to identify which ones were associated with people paying their bills on time.

Despite the high-tech method, this led to some intuitive conclusions, Davies said. For example, for consumers with big collections accounts, VantageScore was able to parse out that those who are looking for credit are higher risks than those who aren’t.

It seems obvious, but a human may not have identified this as a risk factor. Davies said the technique has made VantageScore 4.0 about 17% more predictive than its predecessor for people who haven’t used credit in the last six months and 30% more predictive for people who don’t have activity on any accounts, just collections.

What Leads to a Good Score?

VantageScore still rewards the same behavior as any other credit scoring model, Davies said. The model uses the same 300-to-850 scoring range familiar to many people. (You can find out more about what a good credit score consists of here.)

“You’ve still got to pay your bills on time,” she said. “You should still keep your credit card balances low. What this is going to do is look more thoroughly and holistically at some of the other pieces of data.”

VantageScore, which launched in 2006, claims to be able to assign scores to more than 30 million people than traditional models, like the widely used FICO score. The 4.0 version, however, will likely score about 500,000 fewer people than its predecessor because of the removal of many civil judgments and tax liens from credit files.

The removals are part of expected changes coming to credit reports as part of the National Consumer Assistance Plan, an effort by the three major credit reporting agencies expected to boost scores for many people. The agencies agreed to the plan in order to settle an investigation by 31 state attorneys general in 2015.

VantageScore vs. FICO

While Davies didn’t have numbers on how often VantageScore is used compared to FICO, she said VantageScore is increasingly popular. Version 3.0 was used 8 billion times in 2016, she said, up from 6 billion the prior year. (You can see your VantageScore 3.0 for free on Credit.com.)

More than 2,000 financial institutions use VantageScore and most credit issuers, she said. The fourth version of VantageScore has shown improvements in predicting mortgage risk, and Davies said the company hopes the new score will help them break into the mortgage market.

Davies said it would be naive to think that VantageScore could end the dominance of FICO, but the goal is to improve the scoring marketplace overall.

“The ideal world would be that we have meaningful market share, but that, more than anything, we’re an organization that’s about pushing all scoring organizations to deliver better products,” she said.

Image: NKS_Imagery

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What Everyone Should Know About the New VantageScore 4.0 Credit Score

View Your Free FICO Score for all 3 Credit Bureaus

In the world of consumer credit reporting and credit scoring moves at glacial speed. Every few years credit scoring systems are rebuilt or, more formally, redeveloped.  But, it’s rare that the newer versions of credit scoring systems are meaningfully different than their predecessors.

However, today VantageScore Solutions announced the release of the 4th generation of their VantageScore credit score which will become available from the three credit reporting agencies in the Fall of 2017, and it’s a game changer.

What is the VantageScore Credit Score

VantageScore Solutions was created by the three credit reporting agencies in 2006. The VantageScore credit score is a tri-bureau credit scoring model, meaning it is available for purchase and use from all three of the credit reporting agencies. The score is scaled 300 to 850, and the higher the score the better you look to lenders. According to VantageScore some 8 billion of their scores were used during the 12-month period between July 2015 and June 2016.

How is VantageScore 4.0 Different Than Prior Versions

VantageScore 4.0 is the only credit scoring system that considers your “trended” credit data.

What trended data says about the consumer is whether they’re paying their credit card balances in full each month, or if they’re just paying a small amount and revolving some or most of the balances to the next month. In the older form of credit reporting, prior to trended data, there was no way to distinguish between someone who paid in full each month from someone who paid a small amount and rolled the remaining unpaid balance to the next month.

Several years ago the credit reporting agencies began maintaining and reporting the historical balances and payments made on your credit card accounts. So rather than just reporting what your balance was last month, all three credit bureaus now report the historical balances and the amount you paid going back 24 months. This information is being called “Trended Data.”  You can see your trended data by looking at your credit reports via www.annualcreditreport.com.

Why does trending data matter?

In short, people who do not pay their cards in full each month are riskier than people who do pay them off in full each month.

That’s not anecdotal. TransUnion performed an analysis comparing the risk between transactors and revolvers and the results were staggering. People who do NOT pay their cards off in full each month are 3 to 5 times riskier than people who do pay in full each month. But until VantageScore 4.0, there was no difference in credit scores for someone pays in full each month versus not doing so. That’s why this is a big deal for lenders…it’s a materially better scoring model.

When Will Lenders Start Using the New Score?

This is the million dollar question…when? Converting to a new credit score is expensive and time consuming, and not mandatory.  Because of that, the industry tends to take a very long time fully adopting new scoring systems. Even FICO 9, the most current version of FICO’s credit score, doesn’t have a critical mass of users and it has been commercially available since late 2014. But, the features of VantageScore 4.0 are very compelling so it’s reasonable to expect lenders to be very interested as soon as the model goes live at the credit bureaus.

Having said that, VantageScore has partnerships with a variety of websites, like Credit Karma and Credit Sesame, that give their scores away to the sites’ registered users. Converting to newer score version is much easier for these websites because they don’t have the same barriers that lenders have. VantageScore 4.0 will likely be live and available from one or more of these websites not long after it goes live in the Fall of 2017.

What does this mean for you?

  1. It will become more important to pay your bill in full each month.

For you, this new model underscores the importance of paying your card in full each month. The average interest rate on a credit card is about 16% so it’s expensive to revolve balances. Notwithstanding the fact that you’re paying interest on the unpaid balance, now by not paying your balance in full your VantageScore 4.0 score is likely to be lower because you’re a riskier consumer. Conversely, those of you who do make it a practice to pay your cards in full each month, your VantageScore 4.0 score is likely to be higher because you’re a less risky consumer…and you’re not paying interest.

  1. Liens and judgments won’t hurt your score quite as much.

On or about July 1, 2017 the credit reporting agencies will remove most of the judgments and about ½ of the tax liens from credit reports. VantageScore 4.0 has been engineered to be less reliant on liens and judgments because, not surprisingly, there will be considerably fewer incidents where those public records find their way to credit reports. This isn’t really a big deal for consumers but it is a very big deal for lenders that will rely on the new score.

  1. Medical collections less than six months old won’t hurt your score at all.

Further, VantageScore 4.0 will ignore medical collections that are less than six months old, as in they won’t hurt your score at all. And the credit bureaus, as part of the NCAP, will remove medical collections that are paid or are being paid by an insurance company. The hypothesis, which makes perfect sense, is to avoid any unfair score impact caused by the inefficient insurance claim process. And for those medical collections that are older than six months and are not paid by insurance, which will remain on credit reports, VantageScore 4.0 will discount them so they don’t have as much of a negative impact as non-medical collections.

The Bottom Line: The VantageScore 4.0 is better for consumers and better for lenders.

The changes that were made benefit consumers who pay their cards off each month, and/or have medical collections. The changes benefit lenders because the score is considerably more powerful because of the consideration of the trended data information. It’s rare that a new scoring system is a true win-win for consumers and lenders…and VantageScore 4.0 is just that.

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My Free Credit Scores Are All Different. What Gives?

credit-scores-different-types

There are lots of places that offer free credit scores nowadays, but not every score is the same. Even when you pull your free credit scores, chances are the scores will be different.

Why is that?

Free credit scores can differ because of the scoring model used, the credit bureau supplying the data and how frequently that information is reported to places offering free credit scores.

“They don’t always pull the same accounts,” explains Brette Sember, author of “The Complete Credit Repair Kit.” “There may be some information missing which can affect a score, too.” Also, “they don’t monitor your information in real time,” she says. “They only actually check periodically, so it depends on who checked what, when.”

Here are three reasons your free credit scores may not look alike.

1. Scoring Models Differ

There are two major credit scoring models — FICO and VantageScore — and credit sites and card issuers tend to offer one or the other. While the latest versions of FICO and VantageScore have the same scoring range — from 300 to 850 — each weighs the factors comprising those scores differently. For instance, VantageScore says its scoring system benefits those with a thin credit file. (You can learn more about VantageScore here.)

One of the most common credit score misconceptions is that you have only one score, when in reality you have several dozen credit scores. Consumers, in fact, have multiple FICO scores, which can vary based on the credit bureau supplying the data.

2. Lenders Tweak Formulas

Many financial institutions make adjustments to scoring formulas so they are more specific to their credit business. For example, an auto lender might weigh one’s auto payment history more heavily.

3. Timing Matters

As Sember notes, the score you receive may depend on how often your credit information is calculated and when the scores are updated. Your free credit score might not reflect your new home mortgage or paid-off credit card debt. Or that new credit card with a higher credit limit — which reduced your credit utilization ratio, or how much debt you carry on all your credit card(s) versus their total available limits — may not be showing up yet.

So what’s a person to do?

Think of it this way: The scores are all accurate depending on the scoring model and when it was last updated. But things change, and credit is fluid. Free credit scores are best used as more of a guide than a precise figure. The point is to track your credit score to make sure it’s moving in the right direction by always paying your bills on time and in full. (You can get two of your credit scores, updated each month, for free on Credit.com.)

“There are hundreds of credit scores, and they are for educational purposes,” says credit coach and Credit.com contributor Jeanne Kelly. “Each of these varies on how the credit score is calculated.”

She adds, “My rule is, if you always just focus on your credit report and make sure you try to maintain healthy credit, then no matter what score is used, it will be a good one.”

More on Credit Reports & Credit Scores:

Image: Courtney Keating

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