Though most consumers are familiar with their primary three-digit credit score, almost 40 percent don’t know they have more than one score, according to a 2019 survey by the Consumer Federation of America.
Why so many credit scores? And why are they so confusing? The reasons have a lot to do with the nature of the credit business–including the fact that the three credit reporting agencies work for your creditors, not you.
“The credit scoring industry’s priorities lie with satisfying their customers, which are the lenders, while the consumer’s data is their product,” says Syed Ejaz, financial policy analyst at Consumer Reports.
Businesses pay Equifax, Experian, and TransUnion to provide them with your credit scores—based on your credit history—to decide whether you’re a good credit risk. But a bank uses different criteria than a landlord or utility to determine whether it wants you as a customer. So the credit reporting agencies tailor the information—and your credit scores—to the demands of each business.
That’s why you have dozens of different credit scores, many of which you don’t know about. Your primary credit score is still used in most cases, but businesses often use several credit scores to determine your creditworthiness. The problem is you may never really know.
“When you add up all the brands and customized versions, each consumer may have more than a hundred different scores, and most of them you may never see or even know about,” says John Ulzheimer, a credit expert who has worked at FICO and Equifax.
The business priorities of the credit industry leave consumers vulnerable to financial harm, advocates say. Because Americans lack full understanding of their credit scores, they’re at a major disadvantage when applying for mortgages or other types of loans.
The credit reporting companies also use credit score data as a marketing hook, barraging consumers with TV ads and email come-ons for credit score updates and credit monitoring programs. That leaves many consumers paying subscription fees for access to a score that may be of dubious value.
Adding to the confusion, the credit industry is marketing new services designed to help you improve your scores. But those programs, such as Experian Boost, may not increase the score you actually need for a particular loan or service.
“There are many other steps consumers should take before signing up for a credit improvement program, such as paying off debts in collection and lowering your use of credit,” says Consumer Reports’ Ejaz.
There are, in fact, several strategies to help you keep tabs on important credit scores as well as improve them, as we explain below.
What Goes Into Your Credit Score
How Credit Scores Work
To get a clearer understanding of the credit score system, here’s a quick recap of the basics.
Your primary credit score—the three-digit number that indicates your level of creditworthiness—is based solely on the information in your credit report, which is put together by the three credit agencies. That data includes your record for paying bills on time, the size of your credit lines, and the amount you owe in loans, among other items.
Under the federal law known as the Fair Credit Reporting Act, consumers can dispute errors and inaccurate information on their credit files. Mistakes can happen frequently, as studies have shown.
But unlike credit reports, there is no federal right to free credit scores, says Chi Chi Wu, staff attorney at the nonprofit National Consumer Law Center. There is an exception: The lender must share the credit score it used if you are turned down for credit or charged a higher rate.
The credit industry generally offers consumers limited insight into the formulas used to determine their creditworthiness or the number or type of scores that determine their access to products and services.
“The scoring algorithms are black boxes, and consumers lack information about what they can do to improve their scores,” says Marvin Owens, senior director for economic programs at the NAACP.
Credit scores can also reinforce the financial hurdles faced by those with low incomes, particularly Black consumers and other consumers of color, says Owens. Although the scores themselves are based strictly on the credit reports, some long-standing financial practices—such as charging higher auto loan rates or restricting mortgage lending to populations in certain neighborhoods—tend to disproportionately hurt the credit scores of Blacks and Hispanics, studies have found.
FICO, also known as Fair Isaac Corp., provides the algorithm, or mathematical formula, that credit reporting agencies use to calculate your credit scores. FICO 8 remains the most commonly used score, and it’s the one you often see pop up on your bank or credit card online account. But FICO 8 is only one of 28 scores that FICO discloses, according to Tom Quinn, vice president of myFICO.
VantageScore, a joint venture formed by the three major credit bureaus, is also used by many lenders, sometimes in addition to your FICO score. You can often find your VantageScore available for free through financial services or credit score websites.
Focusing On The Scores That Matter
Given these various brands and scoring formulas, it’s unlikely that a consumer will ever see the exact same score that the lender is using to make a credit decision.
“Even if you both are looking at the same formula and brand, your credit data is likely to vary from day to day, producing a different score,” says Rod Griffin, senior director of consumer education and advocacy at Experian.
Some of the biggest differences may crop up when comparing your base FICO 8 score to a FICO mortgage score. Mortgage lenders use older FICO formulas, which are required for mortgages sold to Fannie Mae and Freddie Mac, the government-sponsored entities that purchase most residential home mortgage loans.
These older FICO scores used in mortgage lending will weigh some factors more heavily or lightly than the newer scores. For example, if you have debt collection accounts with zero balances, they won’t be counted by more recent scoring formulas. But under the mortgage score formulas, they will be considered, says Ulzheimer.
When it comes to credit card or auto loan scores, the FICO formulas are adjusted for factors designed to be more predictive for risk in those transactions. Your history of repaying previous auto loans counts in your auto score, while bankcard scores focus on credit card accounts.
You probably won’t be able to find out in advance which bureau lenders will tap for your credit score. Many lenders also employ customized formulas when making their credit decisions. But for mortgages, it’s more straightforward—lenders will pull your FICO score for mortgage lending from all three bureaus, which are included in a single document called a tri-merge credit report.
Consumers can get access to 28 FICO credit scores, including those from the major credit bureaus and auto and bankcard industry specific scores, at myFICO.com, FICO’s consumer website.
If you’re in the market for a loan, seeing these scores could be helpful as a rough gauge of creditworthiness. But for most consumers, it’s not necessary to monitor all your available credit scores.
“You can probably get a good general idea of your credit status just by looking at your base score,” Griffin says.
How To Improve Your Credit Score
Although there’s no quick fix to a poor credit score, taking these basic steps can help improve those numbers over time.
Check your credit report. This report is the foundation of your score, so make sure the information is accurate. Normally you can get one free credit report from a different reporting agency each year, which you can space out every four months to ensure regular updates. But because of the pandemic, you can request weekly reports from all three agencies through April 2021. Still, most people need to look at their reports just once a year, Wu says.
It’s best to go to AnnualCreditReport.com when requesting your report, says Leonard Bennett, a consumer litigation attorney in Newport News, Va. If you instead request your report from one of the major credit bureaus, you may be subject to forced arbitration, which could limit your ability to take legal action in the event of problems or errors in your files, Bennett says.
Dispute any errors. If you spot a problem, such as an incorrect address or unrecorded bill payment, file a dispute promptly. You can do this online, but consider mailing in the form, with return receipt requested, to have a record of the dispute, says Wu.
You may need to be persistent. By law, the credit agencies are supposed to have 30 days to respond, but the Consumer Financial Protection Bureau has said it will not enforce that deadline during the pandemic because of staffing challenges at the credit bureaus.
Consumer advocates recently urged the CFPB to enforce the deadline, noting that consumer complaints about delays in resolving disputes have soared in recent months. But so far the CFPB has not changed its policy. The CFPB did not respond to a request for comment.
Stay on top of your finances. Two steps alone—making timely payments and minimizing your use of credit—will go a long way toward improving your credit score. Those two factors alone account for 65 percent of the FICO 8 score, says Ted Rossman, industry analyst at CreditCards.com.
If you’re having trouble managing your debts, consider getting help from a nonprofit credit counseling agency. You can find one at the National Foundation for Credit Counseling.
Plan ahead if you’re borrowing. If you’re looking to take out a loan, be careful to avoid moves that could hurt your credit score. Applying for a new credit card, for example, could result in a hard inquiry on your credit report, which is likely to ding your score.
It also makes sense to avoid closing credit card accounts. That would reduce your available credit, thereby raising your utilization rate, another factor that could hurt your score, says Rossman.
Once you’ve secured your loan, you can feel free to reshuffle your accounts. With good credit management, your score will eventually rebound.
Credit Score Improvement Program
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