You probably know that your credit score can affect your ability to take out a loan or qualify for a credit card. What you might not know is that you can have more than one credit score. In fact, you have dozens.
There are a number of reasons for this:
- There are many different model providers - The two most common credit score model developers are FICO and VantageScore. Each of these developers have multiple models. Each model will generate a different score.
- Models must be periodically updated - Any credit score model can lose its predictive power over time and model developers and lenders perform frequent testing to ensure models are working properly. As credit scoring models become less predictive, the model must be updated with fresh data and new variables to ensure it is keeping pace with the economic climate.
- Each credit bureau generates its own score - Each credit reporting agency maintains its own unique credit file based on the information the agency receives from various data furnishers. Credit scoring models are applied to your credit file at each credit reporting agency. There can be differences in the data in each credit bureau file which can cause your credit score to vary somewhat. With the FICO model, a separate algorithm is created specifically for each bureau, which can also cause the scores to vary. The VantageScore model does not use separate algorithms, so score variances at the agencies are solely due to data differences between your credit files.
- Credit data updates - A credit score is like a snapshot in time. The score reflects what is contained in your credit file at the time the score is pulled. Data is continually being reported by creditors to the credit bureaus. This usually includes information about your credit accounts, such as loans and credit cards, credit inquiries (a list of lenders that have requested your credit report when you apply for a loan or credit card) and a list of any overdue debts turned over to collection agencies, foreclosures, bankruptcies, liens and other legal financial obligations. So the next time your score is pulled it could be different because of recently reported data.
If the score difference is only a few points, it usually does not have much effect on whether you can qualify for a loan or credit card and what interest rate the lender will offer you. If, however, there is a big difference between scores, for example, one bureau's score is 650 and another's is 710, you should request a free copy of all three reports through www.AnnualCreditReport.com or by calling 1-877-322-8228. Thanks to the U.S. Government's Fair Credit Reporting Act, you can get a free report from all three bureaus once a year from this source. If you've already received your free report, you can contact each credit bureau directly and purchase a copy of your report for $12 or less per report.
Once you have your reports in hand, review them carefully to make sure the information is complete and correct. If you find an error, contact the credit bureau and dispute the incorrect information. VantageScore has links to all the credit bureaus’ contact info and portals to help correct errors here. It is important to note that not all creditors report to every credit reporting agency. If you notice an account does not report to a particular credit reporting agency it may be helpful to contact the creditor directly.
While it's worth knowing if there's a significant discrepancy between your credit scores, it's also important to focus on the bigger picture. By paying bills on time and being sure to pay off any loans you take out, you'll help build a strong credit history, which can translate into a higher credit score.
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.