Some things to keep in mind when you are working with your credit score in relation to a major purchase:
1. There is no single number. The compilers of the widely accepted FICO credit score allow lenders to customize their system. Plus, each of the credit bureaus — Experian, Equifax and TransUnion — has a proprietary scoring model. As if that weren’t enough, the credit bureaus together invented VantageScore a few years ago to compete with FICO.
2. Different scales, different scores. FICO scores range from 300 to 850. You’ll need about 760 or better for the best mortgage rates, but a score of 720 should be sufficient to get you the best deal on an auto loan. About 10 percent of lenders now use VantageScore, which ranges from 501 to 990 and has corresponding letter grades from A to F. The best rates go to borrowers with scores in the A range (above 900). If you are denied a loan or given less than the best rate, a lender must tell you the score it used, along with the corresponding range and factors that adversely affected your score.
3. Do a credit checkup. You can request a free report once a year from each of the credit bureaus through annualcreditreport.com. But the free report won’t include your credit score. The majority of lenders (especially mortgage lenders) use FICO scores. At myfico.com, you can get your credit report and a FICO score from Equifax or TransUnion (but not Experian) for $20.
4. Free doesn’t always mean free. Sites such as freecreditscore.com and creditreport.com will give you a free Experian score, but only if you sign up for a trial subscription to a credit-monitoring service; if you don’t cancel in seven days, the service costs $15 to $20 a month.
5. Maintain credit health. Try to keep your credit-utilization ratio low – that is, be aware of the amount of debt you have compared with the amount of available credit you have. A history of paying your bills on time helps. Having a variety of loans, such as a revolving line of credit, a car payment and a mortgage, will boost your score.
6. It’s a moving target. The information in your credit files is continually changing. If you’re about to apply for a loan, check your reports for mistakes that could affect your score. Pay down balances as much as possible. And if you’re not applying for a credit card or making a big-ticket purchase anytime soon, says Jason Alderman, a senior director at Visa, “it doesn’t matter what your score is tomorrow.”Jessica Anderson is an associate editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to email@example.com. And for more on this and similar money topics, visit Kiplinger.com.