I just saw a commercial claiming it lets people see all 3 of their credit scores instead of just one. Where do these 3 credit scores come from and how are they different from each other?
This is a great question. The three credit reporting agencies are Experian, Equifax, and TransUnion. Not all creditors report to all three reporting agencies, so it is important to look at all three of them. While the bulk of the three different reports may have the same information, some people find some information, such as credit inquiries, will be slightly different.
The formats of the reports differ, but the information is similar. Each agency will provide information as to how to read their reports.
You have the right to get a free copy of your report each year from each of the credit reporting agencies. The Federal Trade Commission (FTC) authorized www.AnnualCreditReport.com as the official site to get those reports.
There are a lot of advertising out there with similar names. There are a number of services with similar sounding names. However, if you want the truly free one, go to the official site.
One strategy I suggest to clients if they have gotten their credit reports already is to space them out the following year. You have the right to a free report every 12 months. Since the three agencies may have different creditors reporting to them, by staggering the requests the following year they can see what may have been reported through the year. So, if you ordered all three of your reports in March this year, next year you can request one report in March, one in July, and the third in November.
As Russ mentioned, some creditors will report to all three bureau's, while some may only report to one. This can influence your score, but the three bureaus do have a different methodology for their calculations. When applying for a mortgage, almost all mortgage lenders will discard your lowest and highest score, and use the middle score. When purchasing a car, most auto lenders will only use the TransUnion score, and many other creditors will only only use a preferred score as well, but not necessarily TransUnion.
The scores are similar but never exactly the same. In addition what was already mentioned, creditors also report to credit reports at different times. So your Capital One balance may be up to date through September on credit report, and the other 2 may have the August balance. The companies also use different methods for account opening dates. You may have opened your first credit 12 years ago, but each credit reporting company differs in how they use that data. One may use 12 years 2 days, the other may use 11 months 28 days and the other one may use 12 years 11 days for the account opening date in their calculations. So your 3 reports may look identical and you can still have different scores.
There are three major credit reporting agencies: 1) Equifax, 2) Experian, and 3) Trans Union. They report an index of individual creditworthiness in the form of a FICO score. FICO is short for Fair Isaac Corporation, the firm that originally developed the creditworthiness algorithm. The FICO score is between 300 and 850. Higher scores indicate lower credit risk. Each individual actually has 49 credit scores for the FICO scoring model. Because each of the national credit bureaus has their own database, it would be rare that all three would report the same FICO score. Generally, but not always, a lender will use an individual’s median FICO score to determine if they will extend credit.
Even if you pay your bills on time and don't carry much debt, it still makes sense to monitor your credit. Identity theft or a mix-up at your credit card could cause your credit score to drop. The longer it takes to become aware of the problem, the worse the ramifications could be.
Your credit score (also called your Fair Isaac Corporation, or FICO, score) is a three-digit number between 300 and 850 calculated from a formula that's designed to gauge your creditworthiness. The three main credit-reporting agencies (Equifax Inc., Experian PLC, and TransUnion) buy the formula from Fair Isaac. The bureaus use your personal data and crunch the numbers differently, so your score will vary slightly at each agency. When a lender considers your application for credit, they turn to one (or all) of the credit agencies for your score, which indicates your reliability as a borrower.
In general, higher credit scores equate to lower interest rates, meaning less cash you'll have to fork over during the life of a loan. Recently, credit experts think any score above 720 will get you the optimum interest rate. Fifty-eight percent of Americans have a score higher than 700, according to Fair Isaac.
Consumers have the right under the Fair Credit Reporting Act to dispute an item in their credit reports with the credit-reporting bureau. The act stipulates that the bureau must respond to the dispute within 30 business days. Extra time is given if the consumer doesn't send in all the documentation at the time the dispute is filed.
You are entitled to a free report from each agency once every 12 months. If you think you might be applying for a mortgage or another loan, request one well before you need your credit report (at least three months), not after you apply.