If you’re starting to think about the best way to navigate the credit repair process, it may surprise you to find that you have not only one, but three credit scores. In order to truly achieve improved credit, you need to understand why three credit scores exist and what you can do to make each one as strong as possible.
Here’s everything you need to know about your three credit scores so you can fix your credit in the most effective way possible.
The 3 Major Credit Bureaus
The reason you have three credit scores is that there are three major credit bureaus in the United States: Equifax, Experian, and TransUnion. Creditors report information on your accounts (such as credit cards and loan balances). Other creditors and lenders then use that information to evaluate your creditworthiness to see if they should approve your application, how much of a credit line they should offer, and how much interest they should charge.
The better your credit history is, the better loan terms you’ll receive. That’s why it’s so important to know how the credit reporting process works; otherwise, you’ll have no way of knowing how to improve your credit and qualify for better financial terms.
Your Credit Report vs Your Credit Score
Now that you know why you have three credit scores, it’s important to understand the difference between a credit report and a credit score. Your credit report is pulled together by either Equifax, Experian, or TransUnion (or a combination of some or all of these) and shows a detailed listing of all your credit information, including amounts and payment history for your loans and credit cards.
While the reports are compiled by the credit bureaus, they don’t actually provide you with your credit score. That information is provided by a separate scoring model. The credit bureaus have partnered to create the VantageScore, but the most widely used credit score model comes from FICO.
How to Access Your 3 Credit Scores
As a consumer in the U.S., you’re entitled to request a copy of your three credit reports for free once every 12 months. You can get them through the website AnnualCreditReport.com. There’s flexibility in that you can either request all three reports at once or spread them out over a 12-month period.
Remember, however, that your credit score isn’t included with your credit report. While you can get a free “educational” credit score from a number of websites, you can also pay to see your FICO score from the company itself. Another option is to see if your bank or credit card company offers a free FICO score to members.
Why They Are Different
Once you access your three credit scores, you may notice that the numbers vary. That’s because not all creditors report to all three credit bureaus. As you review your credit reports, it’s possible that there is different information on each one. This is important to realize because lenders typically still look at all three credit scores. Since your interest rate is determined by which credit category you fall in (excellent, good, fair, or poor), your three credit scores may impact your loan term.
Lenders usually handle these discrepancies by using the middle number of your three credit scores. If you’re applying as a couple, (for example, to apply for a mortgage) the lender typically uses the middle score of the person with lower credit.
Why They Change Over Time
If you’ve been monitoring your credit score over a period of time, you may wonder why your three scores don’t stay the same. The answer is that your credit is not static. Each month, new information is added to each of your credit reports. A loan balance might lower, or your credit card balance might go up if you had to make an expensive charge. Any late payments are also updated, and on-time payments are beneficial over time.
Each time your credit score is pulled, it’s simply reflecting a snapshot of your credit as it stands today. It could rise or fall the next month based on how you’re doing with your debt, payments, and even the age of your accounts. The credit scoring process is complicated, so it’s important to stay on top of it so you can continue to improve your credit.
Get Professional Credit Repair Help
Need professional help to fix your credit? Contact Ovation Credit for a free consultation today.