Your 790 credit score might not be as great as you think it is.
It all depends on which credit score you’re looking at. If you’re referring to a FICO score of 790 out of 850, that’s excellent, but 790 is only so-so on the VantageScore 2.0 model, which tops out at 990.
So, you may be wondering, what credit score is considered good? It sounds like an easy question, but it’s not. There is no single answer, not even a definitive range. That’s because you have many different credit scores. Current estimates suggest you have at least 58! Yes, really.
The eight most common credit-scoring models used by lenders and consumers rate scores from as low as 150 to as high as 990. However, the one used by 90% of lenders and others who use credit scoring is your FICO score (https://www.myfico.com/).
Now add to that information that the three major credit bureaus — TransUnion, Experian and Equifax — each have their own branded 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. There’s also a score the bureaus created together called 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 come up with a different number every time. Why bother? That’s not going to change a thing. Instead of becoming a slave to the bathroom scale, just eat better and exercise more. Your weight will take care of itself.
A credit score is a direct reflection of the way you manage your credit and financial life. Instead of obsessing over your credit scores, concentrate your efforts on the following three simple steps to improve your money management skills. Your credit scores (all of them!) will then begin to soar.
No. 1: Pay your bills on time. Just do it. Late payers suffer greatly with low credit scores because low scores translate to higher insurance premiums, higher interest rates on mortgages and car loans, and perhaps missing out on that great job or apartment. Your credit history matters!
No. 2: 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 will affect your score.
Each of the big three credit reporting agencies (Equifax, TransUnion, Experian) have a report with your name on it. You can get one free copy of each of your three credit reports every 12 months at AnnualCreditReport.com, a site authorized by federal law. Follow the prompts, but do not be sidetracked into paying for anything. When offered, click through.
When you receive your reports, either by mail or electronically, check them carefully, and dispute any items you do not recognize or know to be factually correct.
No. 3: Get your utilization rate under 30%. Utilization rate is the ratio between your credit limit(s) and the amount of debt you are carrying at any moment. If you have a credit card with a $2,000 limit, you should not be using more than about $600 of it (below 30%) at any time.
Additionally, if your credit cards together have $15,000 of credit limit total, all of your credit card debt should never exceed about $4,500 (below 30%). If you’re over, do everything you can to get below 30%. Then go for the gold by paying them all off to achieve $0 balances across the board.
Is your credit history sketchy? Your FICO score in the tank? Don’t panic. Instead, resolve to fix these things as best you can (no one can delete true and accurate information from your credit reports; negative items will drop off after seven or 10 years, depending on their nature).
Then get busy cleaning up your act. Improving your FICO score won’t happen overnight, but your awareness, determination and commitment certainly can turn around that quickly.
Mary Hunt writes this column for Creators Syndicate. She is the founder of www.EverydayCheapskate.com, a lifestyle blog, and the author of “Debt-Proof Living.” Submit comments or tips or address questions on her website. She will answer questions of general interest via this column, but letters cannot be answered individually.