When considering how to improve one’s credit score, it is important to understand what exactly a credit score is and why you need a good one.
Source: Credit Karma
Now that we know what a credit score is and why you need a good one, let’s turn our focus to the various types of credit scores there are and the multiple factors that make up each score.
There are Multiple Types of Credit Scores
Amongst the numerous types of credit scores, the most renowned scores come from TransUnion, Experian, and Equifax. However, there are numerous others, such like EMPIRICA, NextGen, Beacon, and VantageScore. The thought of consistently checking all of these scores can be quite overwhelming, especially because the scores might be different for each credit bureau you check. So, here are a few reasons submitted by the editorial team at Credit Karma as to why credit scores might vary between the various credit bureaus out there:
- “The scores are from different dates. Since your score can change at any time, it’s important to compare credit scores from the same date.
- “The scores were calculated using different scoring models. We’ll get into this in the next section, but it’s important to know that there are many scoring models out there. When you compare scores among bureaus, make sure they are calculated using the same model. Even with the same model, your scores could vary because each bureau may store information or calculate the score a little differently.
- “The information in your credit reports varies among credit bureaus. This actually isn’t uncommon. Some lenders report to all three credit bureaus, but others report to just two or one or none at all. The information in your credit reports may also be updated at different times at each bureau. In other words, one credit bureau may be missing an account or other information that either helps or hinders your score.”
Multiple Factors Influence a Credit Score
According to Amy Fontinelle of Investopedia, “Your credit score is roughly based on five factors, some of which are weighted more heavily than others:
- “Types of credit in use: 10%
- “New credit: 10%
- “Length of credit history: 15%
- “Amounts owed: 30%
- “Payment history: 35%”
In order to understand how to make sure your credit score as high as it can be, it’s important to implement a handful of strategic tactics to sway credit bureaus to give you a higher score. These tactics are rather easy and can be tracked by various apps that help you track your finances. In order to learn how to improve your credit score, read my blog, titled, “5 Strategic Steps to Take to Substantially Raise Your Credit Score.”