Your Credit Score: What It Is and Why It Matters
Manage Your Money
Credit reports, scores, and how they all work can feel like a mystery.
You may be left wondering where to check your information and whether it hurts or helps. You may have had the experience of checking your score only to find a financial institution came up with another number and wondered why. So, what is the deal with credit and what should consumers know?
First, checking your own report does not hurt your score – it only empowers you with information about your financial standing! You can check all three of your credit reports (yes, there are three of them) at annualcreditreport.com. This secure site allows you to review the information reported by Experian, Equifax and Transunion for free, though there is a fee to check your credit score. Broadview members can check their credit score on the Broadview app at no cost.
Why check all three? While the information on each should be the same in theory, some variation can occur, and you want to be sure you are aware of what is on each report. Additionally, something can be misreported on one and not another. Imagine you checked your Experian report and found no issues, but Equifax was inaccurately reporting a payment as late – you’d want to know about that so you could correct it. That missed payment could cost you in the form of a lower score, higher interest rates on loans, and more money paid to borrow.
What's included in my credit score? Credit scores represent the information on your report at a moment in time. Scores are made up of a few different factors: credit utilization rate (how much of your available credit lines are you using), payment history, credit mix (as in the types of loans you have), new credit, and length of credit history. As consumers, we have the most control over our utilization rates and our payment history – paying attention to these goes a long way to building and maintaining a good score.
Why do I get different scores? First, it’s important to understand that there is more than one scoring model. You may see your score calculated using either the FICO or the Vantage model. Going further, there is more than one version of each model, which produces more variability in score output because the way these models and versions calculate your score differs. If that wasn’t enough, your score can still differ if a model is looking at one credit report vs another.
Staying on top of your credit score through tools like these is a good thing! While you may be heading into a conversation with a loan officer empowered with information about your finances, don’t let yourself get caught off guard if the score they calculate is different. Perhaps your app used FICO and the financial institution used Vantage. Perhaps one looked at your Experian report and the other checked Transunion. Knowing that your score could be different can prevent surprises. Do follow up if there seems to be a significant discrepancy, in case something hasn’t been reported correctly.
Whatever the model, the same behaviors will keep your score in good standing.
- Pay bills on time to avoid late payments on your report.
- Use 30% or less (less is better, if possible) of your available credit lines.
- Only apply for new loans and cards when needed
