Obtaining your credit score is simple enough, as it boils down to one number. But that little number determines if you can get a car, a house, a boat, a planet (probably not for a while), so it’s important to understand how that number works and where it comes from.
The three major credit bureaus, Equifax, Experian, and TransUnion have collected specific, but sometimes overlapping, credit information about you from banks and credit card companies, and then sell it to lenders when you apply for a credit card, a loan, etc in the form of a credit score.
They each calculate their own scores based on similar or the same information, but there are several versions of the software that they use, and your information goes through all of them, and each version gives them a different score.
Lenders will consider any number of these scores, however, if you’re borrowing money for a specific purpose, i.e. a car, a boat etc. the lenders will ask for scores specific to those purposes. FICO, for instance, has specific criteria for deciding a consumer’s eligibility for an auto loan.
The information the credit bureaus use to determine your credit score pertains to five aspects of your credit activity:
Each of these items is weighted differently according to the software that the bureaus are using, usually either FICO or VantageScore or both. Because each element is weighted differently, it’s important to stay on top of all of them, and if you have a low credit score it’s time to start paying attention. Things like income, savings, and job security aren’t taken into account when determining your credit score, so at least you don’t have to worry about those things.
There are a few things you can do to improve your credit score:
Depending on how low your score is, it may take a long time to build it back up, but consistency is king, so keep to this list and you can’t go wrong.
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