Credit scores are probably the most confusing aspect of the whole “Credit” picture. There are several different scoring modules and score types, but only FICO scores are used when lenders make the decision to grant you credit.

There are a couple of different types of credit scores that you will need to recognize.

FICO Scores

Vantage Scores

A good rule of thumb to know: ANYTHING that you are applying for that will have an interest rate associated with it will make their decisions based off of FICO scores.

A good credit score is determined by a certain formula, otherwise known as a mathematical algorithm. All of the information within your credit report is used to calculate this formula to show a bad credit score, an average credit score, or a good credit score. They compare yours to millions of other people to see an average. The whole reason for doing this is so that lenders can see how likely you are to pay back a debt. It is the credit worthiness that comes from calculating your credit scores. You should check your credit score every 3 or 4 months, or use a credit monitoring service to check you credit score or scores from all 3 credit agencies.