There is a lot of urgency when you think of your credit score and while you know it should be good there are a number of surprising facts about your credit score that you may not know. In order to have your best credit score you need to have an A-class credit report which means that having a good credit report is the key to having a good score. But how important is it to have a good score?
[Read: How to Improve Your Credit Score]
With a high credit score which equals to above 750 you will reap a number of benefits. You can save money in mortgage interest, you can benefit from lowered car insurance premiums, you could get approved for that new rental in that upscale neighborhood or community and you could even get a better job. But we all knew that having a great score is a good thing, so what is it that a lot of us don’t know? Here are some surprising facts about your credit score that you may not be knowledgeable of.
There are a number of credit bureaus; those that offer a FICO credit score are Experian, TransUnion and Equifax. These track information on how you use credit. This information is used to maintain a FICO credit score for each individual in their customer database. Hence you can have three different credit reports – one from each bureau and multiple credit scores. Your FICO credit score may vary from credit bureau to bureau because each bureau will have some information that may be slightly different from the other. Sometimes these differences cause significant differences in your credit score.
Credit Reports/Credit Scores – What’s the Difference?
Your credit report and your credit score is again – not the same thing. Your credit report is basically a database with your credit history. It includes what type of credit you may have, how you use credit, what accounts you have including open and closed accounts, amounts owed, your payment history and your credit limits. Your FICO credit score is then generated based on the information that will be found in your credit report. The credit score can range anywhere from 300 (low) to 850 (high). And while we are on the topic of FICO credit scores let’s talk about those in detail.
FICO Credit Scores – Are they All the Same?
Among the not so surprising facts about your credit score is that not all credit scores are FICO credit scores. FICO refers to one type of credit scoring formula and stands for Fair Isaac Corporation which is the firm that created the score. It is one of the more recognized and highly used credit scoring formulas currently in use but there are still many other formulas that are used by different agencies. Sad to say those free scores that you get, aren’t FICO scores. But thanks to the Fair and Accurate Credit Transactions Act you can get a copy of your credit report for free from each of the agencies mentioned above. You can access this from the website annualcreditreport.com.
More Surprising Facts about Your Credit Score
- Everybody doesn’t have a credit history and hence won’t have a credit score. Persons who have never used credit or have never applied for any type of credit won’t have credit history and hence no FICO credit score
- It won’t hurt your score if you get a credit report. It is possible for your score to be lowered if creditors inquire about your score but when you check your own score it does not have a negative effect on your credit history and hence won’t affect the score.
- Maxing out your credit card will reduce your score. This is one of the more surprising facts about your credit score because many people think that as long as you make your minimum payments on time you are good. Data released by Fair Isaacs Corporation notes that maxing out your cc will cause your FICO credit score to go down anywhere between 10 and 45 points.
- The Federal Trade Commission notes that out of every 5 people, 1 individual is prone to having a mistake on one of their credit reports. So get that annual free report so you can take the necessary steps if you find an error on your credit report.
- Credit reports and scores will not warn you about identity theft at a fast enough rate. This is another of the surprising facts about your credit score that a lot of people don’t know.
- Your score can always be improved regardless of how low it currently is. This is true even if you have gone through foreclosure or even if you have filed for bankruptcy. These negative things will stay on your credit report forever so you can improve your credit score over time.
[Read: Debt-to-Credit Ratio and Your Credit Scores]
Our compilation here features some of the most surprising facts about your credit score that the average consumer may not know. Some of these you may have been aware of while others you may not have. But now armed with this information you no longer have to get anxious whenever your credit score or the need for a credit report comes up.