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How Many Credit Scores Do You Have? By Janice Parker

We speak about credit scores as though we only have one, but the reality is that there are hundreds of scores. Consumers often confuse a credit score as being the same thing as their credit report. Your credit scores are calculated using information from your credit reports, which you can get from the three major credit bureaus — Equifax, Experian and TransUnion. Because each bureau may have different information about you, your scores from each bureau can differ. These discrepancies exist because some lenders don’t report to all three bureaus, and the bureaus may not update your reports at the same time. For example, if you have a loan with a local bank or credit union, they may only report to one bureau and not all three, therefore your payment history (good or bad) will not reflect on the other bureau reports, thus causing your scores to be different.

There are two main credit scoring models used to calculate credit scores. The bureaus use credit scoring models to turn your credit report into a three-digit score that indicates your creditworthiness. Currently, the three major credit bureaus use two main models: FICO and VantageScore. This means that you can have both VantageScore scores and FICO scores from each bureau, and your creditors can choose which model they’d like to use. Currently, around 90 percent of lenders use FICO scores, while roughly 10 percent use VantageScore. If you have a Credit Karma account, you are seeing a VantageScore which can sometimes score much higher than a FICO score that is used by most financial institutions.

Each scoring model can have multiple variations. The models have been updated over the years and have released updated versions of their models over the years. FICO, for example, has released its newest version of FICO 9. The big change in this model is how FICO 9 treats unpaid medical bills. The FICO 9 formula treats medical bills sent to collections differently than other debts. These debts won’t ding your credit as much as non-medical debts sent to collection. The older versions of these models are still used by many lenders. You should also know that each model has versions tailored to specific purposes. In addition to providing generic scoring models, both VantageScore and FICO provide specialized models that assess the risk of providing mortgages, auto loans, bank cards and installment loans. For example, if someone has less than perfect credit but has done a great job with their payment history on auto loans, then they are more likely to get an auto loan approval, even with a poor credit score. FICO and VantageScore also provide their scoring models to lenders, who frequently tweak the algorithms to serve their own needs. This is found to be true with payday lenders. They anticipate lending to consumers with poor credit, but their algorithms may weigh more heavily on those who have had poor payment history with other payday loans. So, in addition to the dozens of scores calculated by credit bureaus, many lenders have their own individual scoring methods.

Who’s Report Should You Believe?

You may feel like you need to follow and believe all your scores but instead, try following at least one or two of the scores made available to consumers, and take note of any large changes you see. Because your scores are derived from mostly the same information, a change in one score often indicates a change in the others.

At the end of the day, even though some people might believe you only have one score, you can have dozens — or more! But don’t let that fact worry you too much. It would be impractical to track every single score you have, so consider following at least one or two instead. If you understand the factors that make up a credit score, you’re bound to soar your score! Those factors include:

35% = Payment History (paying on-time)

30% = Amount Owed (don’t max out those credit cards and keep utilizations low)

15% = Length of Credit History (be careful with closing accounts, as it can impact your score negatively)

10% = New Credit (opening several new accounts in a short period of time can look risky)

10% = Types of Credit (the scoring model want to see a diverse mix of credit like mortgage, auto loan, credit card, etc.)

Credit plays an important role in your life – affecting the purchases you make and much more. The more knowledge you have about credit and credit scores, the easier it is to strengthen your financial well-being. If you have specific questions regarding your credit report or scores, please contact me @ 800-772-4557 x80588 or email at jparker@navicoresolutions.org.