Types of credit rating in the USA: Main types and their meaning
Credit rating plays an important role in the financial system of the United States. Banks, lenders and other financial institutions use it to assess the creditworthiness of borrowers. In the United States, there are several types of credit rating, each of which has its own characteristics and significance. In this article, we will look at the main types of credit rating in the US and explain their meanings.
FICO scoring:
FICO scoring is the most common and widely used type of credit score in the US. This is a numerical score developed by the Fair Isaac Corporation (FICO). It is based on information provided by credit bureaus and ranges from 300 to 850. The higher your FICO score, the better your credit score. Banks and lenders generally view borrowers with a high FICO score as reliable and creditworthy.
VantageScore:
VantageScore is another common type of credit score used in the US. It was developed by three major credit bureaus – Equifax, Experian and TransUnion. VantageScore is also a numerical score, but unlike FICO scoring, its scale ranges from 300 to 850. This type of rating also takes into account various factors such as payment history, debt, and use of credit lines.
Some banks use their own models:
Some banks and lenders prefer to use their own credit rating models. This may include a combination of data from various sources, including credit bureaus and internal bank data. These models may be more specific to a particular lender and take into account additional factors related to their products and services. This means that a credit score calculated using the bank’s own model may differ from FICO scoring or VantageScore.
Credit rating for specific industries:
Some industries have their own types of credit rating, which take into account the specific factors associated with this industry. For example, in the automotive industry, an auto credit score can be used that takes into account the history of auto loans and payments on them. These specialized ratings can be useful when considering loan applications related to a particular industry.
In the United States, there are several types of credit rating, each of which has its own characteristics and significance. FICO scoring and VantageScore are the most common and widely used ratings. They are based on information provided by credit bureaus and help banks and lenders assess the creditworthiness of borrowers. Some banks may also use their own valuation models that take into account additional factors. In addition, there are specialized types of credit rating for certain industries. It is important to understand what types of rating are used to assess your creditworthiness and take steps to maintain and improve credit rating in accordance with these models.
