See also: What factors affect your credit score?
FICO credit scores, which are the most widely used credit scores, range from 300 to 850 points. But the VantageScore is an important credit score, too. The VantageScore ranges from 501 to 990 points. (In case you haven't heard of it, the VantageScore was jointly developed by the three credit bureaus: Equifax, Experian and TransUnion).
When I recently checked my credit scores, I was happy to see that I continue to have a stellar credit rating: My FICO score was 798 and my VantageScore was a perfect 990.
I'm not telling you this to brag. On the contrary, I want you to see how it's possible to go from having awful credit to having a pristine credit record.
You see, back in my college days and well into my early 30s, I often mismanaged credit and debt. As a result, my credit was awful and I wound up in debt. Fast forward to 2011, and I have zero credit card debt and excellent credit, too.
For starters, it's important to understand what criteria are used to calculate your credit scores. With the FICO system, here's how your credit is evaluated:
- Payment history – 35 percent of your score
- Amount of credit card debt owed – 30 percent
- Length of credit history – 15 percent
- Mix of credit – 10 percent
- Inquiries or new credit – 10 percent
The VantageScore attributes slightly different weightings to these categories, but it, too, evaluates each of these areas.