Credit Scores

So, I have only one credit score, right?
Actually, no. That is a myth. In fact, lenders use a variety of credit scores. Two of the most recognized companies that produce credit scores are FICO and VantageScore.

Where do my credit scores come from?
Credit scores are calculated using information about your credit and payment history. Different types of scores may take into account different types of information. Lenders specify which credit score they want delivered with the credit report. For example, if you are applying for a loan to buy a home, a lender may look at a score specifically designed to determine your likelihood of successfully repaying a home mortgage.

What if I don’t have a credit score?
If you have little or no credit history, it might be impossible to calculate a credit score. Most credit scores need at least three to six months of current credit activity. If you have never had a credit account, try applying for a retail, gas or secured credit card to begin your credit history. If you keep your outstanding debt low and pay your bills on time, you can build your credit score over time.

How do credit scores change?
Let’s begin with the last time a credit report was requested for you. Any credit activity that occurred after that (taking out a loan, applying for a new credit card, buying something “on time”) has been added to your credit history. At the same time, some outdated details might have been removed. Now when your credit report is requested again, a new score is associated with it. Remember that your score is dynamic. It is constantly changing as the information being provided is updated.

What can I do to improve my credit score?
In addition to lowering credit card balances that have been charged to the max, you can do several things to build a healthy credit score:

  • Pay your bills consistently and on-time
  • Keep balances low (below 30% of your available credit limit if possible)
  • Don’t close old accounts in good standing if you don’t need to
  • Maintain a mix of active credit trade lines (installment and revolving debt)
  • Don’t apply for credit more than a couple of times per year.

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