Everyone has many different credit scores. Some are designed to provide an overall view of your ability to manage money, while others seek to evaluate how well you would handle a specific type of loan.

Two companies generate most of the credit scores used today: FICO and VantageScore, with lenders favoring FICO. Would it surprise you to learn that you have 28 FICO scores, including base scores and subscores? And the Fair Isaac Corporation generates new scores every few years.

Regardless of the company behind the score and the credit scoring model, all credit scores have the same goal, to identify who can probably repay a loan without hassle and who cannot. Lenders refer to your credit score to assess the risk they would take loaning you money.

FICO and VantageScore credit scores range from 300 to 850.

Let's drill down to specific situations and explore which credit scores matter most depending on your goal.

Tips and advice in this article:

? Applying for a Credit Card

Credit card issuers mostly use FICO Score 8 and, in particular, a refinement of it called Bankcard Score 8. Introduced in 2014, the base FICO Score 8 proved so popular with lenders that most companies are sticking with it despite the promotion FICO has put behind its successor, FICO Score 9, which carried on the innovations of FICO Score 8 while adding the chance to lift your score by paying on-time rent.

For evaluating people's handling of revolving credit, FICO Score 8 has proven especially accurate, garnering many fans in the credit card industry. Revolving credit is credit that can be used anytime, such as credit cards and home equity lines of credit.

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There's a link between credit scores and lasting romantic relationships

In the FICO Score 8 model, as in all credit score models, your payment history is extremely important. The model forgives one late payment (nobody's perfect), but a pattern of late payments is judged more harshly than it was under previous FICO scoring models.

Likewise, under FICO Bankcard Score 8, a late credit card payment can be expected to lower your score. After all, your risk to a new credit card company is best predicted by how you handled past credit card obligations. FICO doesn't reveal how much a certain behavior will hurt one's credit score or for how long.

Starting at 250 and running to 900, the FICO Bankcard range is broader than base FICO scores. They can better reflect nuances in people's credit backgrounds and should allow more people to qualify for some credit cards compared to narrower scoring ranges.

Improve your odds of being approved for a credit card.

Being an authorized user on someone else's credit card might not help like it used to, unless the other person is a close relative. FICO Bankcard Score 8, like the base Score 8, detects and ignores activity from people trying to use the "authorized user hack" to raise their own credit score.

These three methods will go a long way toward making you look better to credit card companies.

  • Avoid late payments. A missed payment can stay on your credit reports up to seven years, though the impact it has on your scores lessens over time.
  • Dispute errors on your credit reports. Download free reports from the only official government-backed site, AnnualCreditReport.com.. A study by the FTC found that one in four consumers identified credit report errors that might have an impact on their credit scores.
  • Pay down card balances. The second-most important component of your credit score, after payment history, is credit usage. Credit card companies don't want to see that you're near the limit on your existing cards.

Check your credit score for free.

Look no further than your current credit card provider. Many provide their cardholders with free credit scores. If you have a Capital One card, you can see your VantageScore. FICO scores are available for free if you have a card from American Express, Bank of America, Citi, Discover, or Wells Fargo.

? Shopping for a Mortgage

In the home loan industry, FICO Score 5 is most widely referenced. To compile this score, FICO looks at information gathered by Equifax, one of the three major credit reporting agencies, or bureaus. With an emphasis on installment credit, FICO Score 5 is well suited to evaluate a person's suitability for a mortgage. Installment credit, such as home loans and student loans, is debt with a set payment.

Information from Experian feeds into your FICO Score 2; information from TransUnion makes up your FICO Score 4. These scores are also used in mortgage lending.

“The number-one strategy for finding the best home loan works for everyone regardless of credit score: Shop around on Lendgo.

One reason lenders still rely on FICO 5 instead of later models like FICO 8 is because the calculations in Score 5 are less forgiving of unpaid collection accounts, especially medical accounts. Your FICO Score 5 is what matters in the mortgage industry because statisticians have seen a correlation between borrowers who lapse on repaying large, long-term collection accounts and those who default on their mortgage.

Mortgages are long loans, and we don't have a crystal ball to see tomorrow, much less the next 30 years. The best predictor of how well people will manage a mortgage payment is how they handled long-term installment loans in the past. FICO Score 5 has proven useful in evaluating the past behavior that probably weighs most on future performance.

"Ideally, you should start shopping for a mortgage three to six months before you plan to buy a home after you have a down payment," advises Realtor.com. "This lengthy lead time is important because you may have to invest time in boosting your credit score."

Get your finances in shape before you apply for a mortgage

Realtor.com says that a credit score of 660 or higher will be needed to qualify for any mortgage at all. The best interest rates and terms are generally reserved for people with very good scores (740+).

On the horizon: FICO Score 10 T could become the new standard for home loans.

Improve your odds of landing the best mortgage or refinance.

The number-one strategy for finding the best home loan works for everyone regardless of credit score: Shop around. You can ask friends and family for recommendations, but don't overlook the comparison power that's at your fingertips.

With Lendgo, you can pinpoint your most promising lenders among thousands. Our industry-leading search technology will narrow down a vast network of accredited lenders to a short, manageable list of who has your best rates and terms.

? Buying or Leasing a Car

Dealerships could use either of the two main scoring systems to approve your application for a new car or a lease: FICO Score or VantageScore. Car lenders all have their own standards, such as the minimum score they require before approval and the score a borrower must have to qualify for the lowest interest rate.

The higher your credit score, the lower the interest rate you qualify for. In Experian's recent State of the Automotive Finance Market report, people with credit scores in the 501-600 range were charged almost three times the interest rate on a new car loan as those with a credit score in the 661-780 range.

Car lenders are usually pretty flexible in working with people who have low credit scores. If you have a lower score than their typical customer, they may still offer you a loan but with a higher down payment and interest rate. They may want to see a few months' worth of paystubs or last year's W-2. In a slow market, dealerships tend to ease up on their credit requirements. In a brisk market, they can afford to turn away drivers with low credit scores.

FICO Score 8 is widely used in automobile lending today per FICO, with the newer Score 9 gaining some ground there. What's more, FICO offers a scoring model just for the automobile industry.

Alongside your regular FICO Score 8 is a special subscore, your FICO Auto Score 8. Using company-confidential techniques, your base score is shaped to predict how well you would manage an automobile loan, resulting in a FICO Auto Score that ranges from 250 to 900 points.

For the automobile score, FICO looks for industry-specific risk behavior. For example, one missed car payment in the past wouldn't have a negative effect on your FICO Score 8 because that scoring model forgives a single late payment in an otherwise spotless record, but a missed car payment would almost certainly lower your FICO Auto Score 8.

What's a good credit score for a car loan?

Cars.com, a leading digital automotive marketplace, evaluates car shoppers' credit scores as follows.

  • Fair: 619 and under
  • Average: 620-699
  • Good: 700-779
  • Excellent: 780-850

Improve your odds of getting approved for a car loan.

Requirements vary by financing company, so if you don't qualify for a loan on one make of vehicle, try another. Keep in mind that the most welcoming dealership for you could be in another part of town.

Aside from shopping around, you can increase your odds of getting a car loan in these three ways.

  • Work on your credit scores. A good place to start is by scanning your credit reports for errors. Why should your score suffer because of someone else's mistake? Request your free credit reports from the government-backed site AnnualCreditReport.com, the only official source of free credit reports.
  • Save for a down payment. Although your credit score might not reflect it, a large down payment tells the dealer, "This person can handle money." More money down means less money borrowed, so you can keep the loan term at five years or less and save on interest.
  • Consider a cosigner. Buying a car with another person could instantly qualify you for a better loan, especially when you are early in your journey to build credit. Definitely try to bring on a cosigner if it means securing a much lower interest rate than you can get on your own.

How much can you afford for a car?

Long-standing advice says that your car expenses should not exceed 15% of your take-home pay. Given the rising cost of automobiles and the stagnation in American wages, however, more recent advice puts the cap at 20%. These expenses include not only your monthly payment but also registration, insurance, and maintenance.

Protect your car for less by comparing thousands of automobile insurance policies in one place.

The auto industry likes to tout how affordable car ownership has grown over the years even as sticker prices naturally creep higher. From 1935 to 2022, data collected by the U.S. Bureau of Labor Statistics shows that automobile inflation averaged 2.46% per year, while overall inflation averaged 3.58%. In this respect, cars are more affordable.

But there's a catch. The dealership's idea of affordability is a lower monthly payment. Cars are actually more expensive than ever, with prices increasing at a higher rate than inflation starting in 2014, as tracked by Kelley Blue Book. Spread across five years, the standard length of auto loans for decades, a car purchase would be unaffordable for most people today. So lenders have moved to longer terms, even as long as eight years, or 96 months.

They play the same affordability game in leasing. Payments are kept lower by jacking up the down payment. Look at the fine print on a TV commercial. While the announcer is talking about paying only $249 a month with good credit, at the bottom of the screen you could see that $4,000 is required up front. The upfront amount could be equal to a year or more of payments—for a car you won't even own in the end.

The appeal of new wheels is hard to deny. And thanks to quality controls, there are reliable rides out there for most any budget. Try not to saddle yourself with a too-expensive car loan, because missing a payment could sink your credit score.

Help All Your Credit Scores by Minding Your Payment History

Under the FICO scoring system, one behavioral category has the biggest impact on your credit score: Payment history. This accounts for 35% of any given FICO score.

In your VantageScore, payment history makes up 41% of your grade.

These competitors agree that the best predictor of how you will manage a future loan is how you managed past loans, whether they were revolving credit cards, automobile loans, or home loans. Your performance is evaluated monthly, so there's really no room to slack off. Do all you can to make the minimum payments due.

If you use a particular credit card sparingly, consider setting up autopay for it. For example, it should be easy to predict the ballpark balance on a MasterCard that's hooked up to a couple of TV streaming services and your Lyft app. Authorizing the card to withdraw its full balance from your checking account every month means you'll never forget to pay it. If you still don’t like the idea of money coming out of your checking account automatically, no matter how small an amount, know that you will be notified a couple of days before the autopay.

Credit Score Key Takeaways

  • It's normal to have many credit scores. Some scores reflect your general creditworthiness while others are industry specific.
  • FICO Score 5 is popularly used in mortgage lending because it emphasizes installment credit.
  • FICO Score 8 and, to some extent, its successor, Score 9, are widely used by credit card issuers and automotive finance companies.
  • Payment history is the largest component of every credit score.
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