When it comes to your credit report and your score, knowledge is power. The following are some facts that many consumers are surprised to learn, and by knowing more about these things, it can help you understand how your credit score is calculated and can make it easier to work towards a better credit score:
Public records can show up on your credit report and affect your score
Did you receive a parking ticket or a library fine? If you’ve forgotten to pay those fees, they can appear on your credit report. These types of fines and fees are public records, and these types of debts can also show up on your credit report and bring down your credit score. Even minor fees can affect your credit score, so it’s best to take care of them right away to avoid bigger problems in the future.
You have multiple credit scores
When lenders are making a credit decision and running your credit, they will see three different FICO scores. Each lender has their own policy about credit scores and credit decisions; some lenders will calculate the average of the three scores and then base their decision on that average, whereas others will only look at your lowest FICO score. As such, you’ll want to always know what all three of your credit scores are. Your Experian credit score might be terrific, for example, but do you know what your other two scores are? Your lowest credit score might fall into an entirely different scoring bracket, which could subject you to different lending terms, or may even affect your chances altogether at getting approved for certain loans. When you request your credit score, make sure to pull all three of them And while you want to focus on raising all three of your scores, keep track of how your lowest one is progressing.
You also have multiple credit reports
Not only do consumers have three different credit scores, but they also have three separate credit reports. Differences can be major or they can be minor. Because lenders don’t have to report your payment activity to all three credit reporting bureaus, and because each agency processes these reports differently, the information on each credit report can vary significantly. As such, make sure you routinely check all three of your credit reports so that you can get a better picture of where you stand credit-wise.
Your credit report might contain mistakes
Just because something appears on your credit report doesn’t mean it’s correct or supposed to be there—in fact, many credit reports contain errors, and even just a single mistake can lower your credit score. Whether it’s an amount that was incorrectly reported (and shows far more debt than what you really owe), an account that you paid off and closed out years ago, or a complete mix-up and listing a delinquent account that you don’t even have—regularly checking your credit report is crucial to catch any potential mistakes. If you ever notice something that doesn’t seem right, you can take action and dispute the item. The credit reporting bureau that is listing the information will launch an investigation to find out if what you are disputing is incorrect or shouldn’t even be there at all. If it is, in fact, proven to be a mistake, the item will eventually be removed from your credit report.