Arizona Tribune - Myths and Realities About Types of Credit Scores

Myth 1: You only have one credit score

Fact: You can simultaneously have many different credit scores.

There are two companies that create widely used credit scoring models. They each assign credit scores based on their own distinct criteria (though there is usually a significant overlap). However, each of these scoring companies have updated their scoring models over the years. They may also offer industry-specific scoring models to different lenders, for instance, MyFICO® offers FICO score versions for credit card issuers, mortgage lenders, and car loan issuers. Lenders may choose scoring models based on their industry needs and preferences.

Myth 2: Your credit scores from different lenders should all be the same

Fact: Different scoring criteria may mean your scores don't always align.

The reason many scoring models and versions exist is that each model calculates credit scores differently. For instance, some scoring models exclude home equity lines of credit (HELOCs) from credit utilization calculations, but others don't. What does this mean for you? If you apply for a car loan at a dealership, they may inform you that your credit score is lower than the one on your recent credit card statement. This doesn't necessarily indicate deception or a mistake; it often means they're simply relying on different data. There's no reason to worry if your credit scores don't match perfectly. A small difference of 25 to 50 points can be normal. However, large differences may require a thorough inspection of your credit reports.

Myth 3: Credit bureaus using the same scoring models will feature identical credit scores

Fact: Timing and lender reporting choices may influence your credit score.

While each bureau is constantly updating your credit file with new payment information, the three bureaus may not receive information at the same time. So, if you check one credit report on the 1st of the month, a second report on the 15th, and your third report on the 29th, you may see slightly different scores based on your credit activity and your lenders' reporting schedules.

Another factor that may result in different credit scores is that not all lenders report payments to all three credit bureaus. Lenders can choose to report payments to just one or two credit bureaus at their discretion. Differing payment information may result in different credit scores even with the same scoring model in play.

Free credit monitoring services can help you track some versions of your credit score. In addition to this, a periodic review of your credit report can help you spot any major discrepancies or fraudulent accounts that may be affecting your credit score. Disputing incorrect information or fraudulent accounts when you see them can help prevent significant credit damage and return your credit score to normal.

Disclaimer: This content is sponsored by myFICO and is provided for informational purposes only. The information shared here is not intended to serve as financial, legal, or credit-related advice. Readers are encouraged to consult with their personal financial advisors or credit professionals to assess their specific situation. To learn more about myFICO's services, including credit scores and monitoring tools, please visit the myFICO website or reach out to a myFICO representative.

CONTACT:
Sonakshi Murze
Manager
[email protected]

SOURCE: iQuanti

View the original press release on ACCESS Newswire

G.P.Martin--AT