CREDIT SCORES
CREDIT SCORING MODELS
With three credit bureaus – Experian, Equifax and TransUnion – and various rating products, there are many ways to assess your creditworthiness. Different scoring models weigh certain factors more heavily than others. FICO scores are used in 90 percent of lending decisions in the U.S., according to its website. So what does this mean for you? While there are many types of scoring models, the same principles span across each model. In order to take advantage of higher scores, you must take the steps necessary at repair your prior mistakes and improving your positive credit habits.
Understanding Credit Score Differences
The three major credit bureaus are Equifax, Experian and TransUnion. Most people have different scores from each bureau; there could be a few reasons for this. Here are some of the most common ones.
- Not all bureaus have all of the same information. One bureau could have more up-to-date information while another may lack the information completely
- Scores were formulated using different scoring models
- The scores were updated on a different cycle
TIPS TO IMPROVE YOUR CREDIT SCORE
Any action to improve a score must be made thoughtfully. Some actions aimed at improving your score may actually make it worse. Contact us, and we can help you determine which steps will help your credit the most, without doing harm. Many individuals gain significant FICO score improvement techniques such as:
- Making all payments on time, especially to installment and revolving accounts, as these accounts report to the credit bureaus on a monthly basis.
- Do not apply for new credit cards or loans (unless we specifically tell you to).
- Pay credit card balances down to 30% or less of your credit limit and make sure your credit card company reports a limit.