People often say they want a good credit score. They should be saying they want good credit scores.
Everyone has multiple credit scores that help inform lenders how much of a risk you are to default on things like an auto loan, mortgage, or credit card debt. Lenders will use a slightly different score for each type of loan, and they could be working off of different information based on any discrepancies between your credit reports from the three bureaus.
Here's why everyone has multiple credit scores.
There are three credit bureaus collecting records on you
The three main credit bureaus in the United States are Equifax, Experian, and TransUnion. Each company keeps a record of all your credit accounts, auto loans, mortgages, student loans, personal lines of credit, and any other kind of loan. They also keep tabs on any bills that went to collections, bankruptcies, and other black marks that signal a big risk for lenders.
It surprises many people that different bureaus can have different information about your credit, and one bureau might have mistaken data that another doesn't. It pays to review all three of your credit reports annually, and you can do that for free by visiting annualcreditreport.com. If you find something that doesn't look quite right, you can dispute it with the credit bureau.
One of the biggest discrepancies between reports will be the number of hard inquiries on each. Lenders usually only have to check one credit reporting agency to assess your financial risk and make a lending decision. As such, some reports will show fewer hard inquiries than others, which improves your credit score from those bureaus.
There are two main scoring models
There are two main competing scoring models for credit scores. FICO is the most popular and most often used by lenders, but the credit bureaus developed VantageScore as an alternative. The newest version of VantageScore (yes, there are multiple versions of each scoring model leading to even more possible credit scores) conforms to the the 300-850 range of the FICO scoring model.
On top of FICO and VantageScore, each lender may develop their own scoring model tuned to their own preferences to reduce their risk of a customer defaulting. Still, about 90% of lenders use some form of the FICO model.
Credit cards, mortgages, auto loans, and personal loans all use different scores
Both FICO and VantageScore have developed specialized scoring models for different use cases. There are three versions of the VantageScore model and nine versions of the FICO scoring model, and each version can be tailored toward specific uses.
For example, if you apply for a mortgage, the lender will likely pull the following FICO scores to determine your risk and interest rate.
- FICO Score 5 based on your Equifax report
- FICO Score 2 based on your Experian report
- FICO Score 4 based on your TransUnion report
All told, there are about 56 different FICO scores across the three bureaus that lenders will use for various loan applications.
You don't need to track all of your scores
With dozens of credit scores, you might be worried that you'll never be able to stay on top of your finances and achieve a good credit score for every lending situation. But you don't have to track every single possible credit score a lender might use.
If you can track a version of your credit score from each of the three bureaus, you'll be well ahead of most consumers. Your FICO 5 from Equifax for mortgage lenders will likely positively correlate with your FICO 8 from Equifax for credit cards or general loans. As long as one of those is pointing in the right direction, it's a good bet all the other credit scores based on the same data are as well.
There are lots of different ways you can track your credit score for free. Many credit card companies now offer a free credit score from the bureau they use themselves. Your bank or credit union might also offer a free credit score. There are also websites and apps from the credit bureaus, credit card companies, and independent third parties that will offer a free credit score to anyone.
Pay attention to the fine print on those free credit scores to see which credit bureau each score is based on. Roundup two or three sources that will provide a score from each bureau, and you're good to go.
As long as you stay on top of your finances, pay your bills on time, and use your credit responsibly, your credit scores should generally stay good. It never hurts to keep an eye on them, though.