Why do I have so many credit scores?

Now that it’s so easy to get your free credit score, you may have consulted it several times in several places: personal finance sites, credit card issuers, your bank. You have no doubt seen how your score varies from source to source and even from week to week from the same source.

This is because you have multiple credit scores, not just one. Even if they do not match, each of these scores could be “good”.

Why are there so many different credit scores?

A credit score is a three-digit number that equates to an educated estimate of the likelihood that you will repay the borrowed money as agreed.

You have multiple scores because multiple companies create them – and there are different scores for different goals, such as automatic scores and bank card scores. There are also different versions, as the rating companies update the scores to make them more predictive. Your scores may be different depending on:

The credit bureau providing the data

Three major credit bureaus – Equifax, Experian, and TransUnion – collect, hold, and sell data about your credit usage. Each creates a credit report for you using information from lenders, debt collectors, and public records.

Your creditors may or may not report your activity to all three bureaus, so everyone’s information is not the same.

Your creditors may or may not report your activity to all three bureaus, so everyone’s information is not the same. And creditors report activity on different cycles, so your data varies throughout the month as new information comes in.

The rating company and the formula

The two main credit rating companies, FICO and VantageScore, use different formulas. Their formulas are trade secrets, but they consider roughly the same data with a few differences in weighting.

They also update their plans every now and then, but lenders and card issuers can stick with an older version instead of upgrading. Thus, each company can use several versions at the same time.

The scales

Most scores are on a scale of 300 to 850 (FICO calls this the “base score”). But there are also specialty scores, like car loan and bank card scores, and these typically use a scale of 250 to 900.

How to make sense of your scores

Check the source of a score to understand which credit report it looked at, and which company and version of the score produced it. This will explain some differences.

For example, NerdWallet offers a free VantageScore 3.0 using TransUnion data. It is updated weekly and uses a range of 300 to 850. Discover offers a free FICO 8 score each month to all consumers. It gets data from Experian and also uses a range of 300 to 850. However, Citi offers its credit card customers a FICO Bankcard Score 8 using data from Equifax. Its range is from 250 to 900.

These are three scores, each with data from a different office, each calculated using a different formula – and each valid.

You really don’t have to be obsessed with finding the “right” score or the exact number.

You really don’t have to be obsessed with finding the “right” score or the exact number. Credit Score Strips – The General Area where do your scores fall – are more important. It is likely that your credit scores are in or near the same band.

Also monitor the trend of your scores over time. You want to work to be in the “good” or “great” bands because the higher scores usually translate to the best rewards cards and the lowest interest rates.

How can I get better credit scores?

Credit scores, for all their differences, have some major similarities. They use most of the same data, just by weighting it differently. This means that the same techniques will work to improve your credit regardless of the scoring model or data used:

  • Pay your bills on time, every time. Your payment history has the biggest influence on scores.

  • Use only a small portion of your credit limit – no more than 30%, and less is even better. This factor, called “credit use”, also has a big influence on scores.

  • Apply for credit sparingly – more than once every six months can hurt your score a bit.

  • Keep old credit cards open unless there is a compelling reason to close them.

  • Check your free credit reports to make sure your accounts are reported as they are meant to be. Correct any errors you see, as inaccurate negative scores on your reports can hurt your scores.

Do all of these things, and over time your scores will take care of themselves regardless of the score, version, or credit bureau.

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About Pia Miller

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