Not all Scores are Equal
There are many different credit scores, but only your FICO score is important. Also, FICO stands for Fair Isaac and Company, the company that made the score. This is the score that almost every lender looks at. Other scores try to be similar to the FICO score, but they often differ by a large amount.
Three names on one score
Three different names can be used to talk about the FICO score. This is because the three bureaus have given it a name that they can use to market themselves. It's called a BEACON score by Equifax, an EMPIRICA score by TransUnion, and the EXPERIAN/Fair Isaac Risk Model by Experian. Because of this, you will hear three different scores, even though they all come from the same formula.
Why do your three scores not match up?
Your three scores are different because each bureau gets information from a slightly different mix of creditors. If you look closely at your three credit reports, you will see that each one is missing some accounts. Time is also important. One bureau may notice a change in your credit score faster than another.
What is Your Score Made Up of?
Do you try to fix your credit? Do something. But if you want to change your score, you need to know how it works. Here is an overview of the things that made it happen.
History of Pay
The most important thing is your pay history. This group contains accounts with payments and payments that keep coming back, as well as public records and collections. When something bad about you is old, it hurts your score less. The first step in fixing your credit is to look at your credit report for obvious mistakes in this area, which makes up 35% of your credit score.
Balances
The next group is the amount of money in your accounts. A big factor is how your credit limit compares to the amount you owe on your revolving accounts. If you are trying to fix your credit, you should keep your revolving balances as low as possible. The relationship between the current balance and the original balance on instalment loans is also taken into consideration. This part of your score is worth 30% of your total score.
The Time of Books
Your credit score will go down if you get new credit, and it will go up if you have been paying your bills on time for years. One common mistake people make when trying to fix their credit is to close old accounts. This part of your score is worth 15% of your total score.
New credit, and questions
There are also things like new credit and recent inquiries. Many people who want to fix their credit get new secured credit cards to help them in the long run. But in general, people who are trying to fix their credit should not take out any new credit. Either way, this will cost you a few points. This counts for 10% of your score in Fair Isaac.
Credit Types
The last 10 percent is based on the type of credit you have. Fair Isaac won't say what the best mix of mortgage, instalment, revolving, and consumer debt is, but in our experience, the key to long-term success in credit repair is to be a moderate user of credit, make your payments on time, and try to keep your revolving balances low.
Incorrect Credit
As you start to fix your credit, it's important to have good information. Surprisingly, the same three credit bureaus that sell lenders real FICO scores also sell consumers estimated scores that they can't count on. People go to TransUnion's "True Credit" website every day and pay for what they think are their credit scores. What they get are scores called "TrueCredit," which are not at all like the FICO scores that lenders use. Here is the small print from the TransUnion site, which is almost impossible to find. "TrueCredit has nothing to do with Fair, Isaac and Company, and the credit score you see here is not a "FICO score." TransUnion's credit scores may not be the same in every way as the scores that other companies give to consumers."
Credit Scores for Real
Are you getting ready to fix your credit? Do you want to see your FICO scores as they really are? The only place where people can buy their real FICO scores is at http://MyFico.com. Do you want to save money? When figuring out if you qualify for a mortgage, mortgage brokers usually look at all three FICO scores. If you ask, they might give you a copy of your report with all three scores on it. Saving a few dollars can't hurt!
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