Having Multiple Credit Scores – Which Scores Do Lenders Use?


Probably no other aspect of our financial lives is so important and yet so misunderstand by so many people as the difference between a credit report, a credit score and a FICO Score.

Your credit report is a narrative, a story, that tells the reader how many credit accounts (credit cards, mortgages, car loans, department store loans, etc.) that you have opened and closed over the last seven years, the maximum credit limit you had on each of those accounts, the percentage of utilization on each of those accounts, and the number of late payments, if any, on each of those accounts. Credit reports are coded in abbreviations so they are difficult to read and understand by the untrained eye.

Credit reporting bureaus collect all the information about you that is contained in your credit report. There are three major credit-reporting bureaus in the USA – Equifax, Experian, and TransUnion. There are also dozens of regional and specialized credit reporting bureaus that have collected financial information on you even if you have never heard of them.

Your existing creditors voluntarily supply some of this information to the credit bureaus. For example, if you are more than 30 days late on your car loan the finance company will report that late payment to the bureau. The bureaus also access public records for information about civil judgments against you and bankruptcy filings. It is only very seldom, if ever at all, that you would become aware of this constant flow of information about your financial life 토토.

A credit score is a number, usually between 300 and 850, that rates the creditworthiness of the information that is contained in a credit report at one particular moment in time. The score number is calculated by a complex mathematical formula that is a closely guarded secret held by the credit reporting bureau that generates the credit score. Each credit bureau has its own proprietary mathematical formula.

Nobody other than the company that owns the credit score formula really knows how it works. People can make good guesses but nobody outside the company can know for sure exactly how your credit score is calculated.

A FICO Score is a score calculated by the Fair Isaac Corporation. FICO scores are somewhat special because Fair Isaac is the king of the hill in the credit scoring industry in the Untied States, and probably in most other countries in the English speaking world too.

Only Fair Isaac Corporation, or a company that licenses Fair Isaac’s scoring algorithm, can provide you with your FICO Score. Outfits that see on those TV ads can sell you something they can legally call a credit score, but it is not a FICO Score. The difference could become very important when you apply for a loan and find out those free credit scores you got for $9.99 a month are nowhere near the same as your FICO Score that your lender is looking at.

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