I am not a professional licensed to give financial advice so please make decisions at your own discretion. I’m just trying to help people understand their finances rather than being sued. I’m also not making any money from promoting these links or products. I just really like them. Thank you!
Previously we discussed what credit is and some aspects associated with it, but I’d like to delve a little bit deeper today. Credit can sound complicated but hopefully, this clears some things up for everyone.
In order to understand how your credit score is portrayed in the eyes of a lender, it’s important to know that there are different scores; you may have heard from them already:
- Equifax
- TransUnion
- Experian
These three bureaus gather your data from banks and other lenders and toss it into their proprietary algorithm. Then out pops out a credit score. The problem with these different bureaus is that each one might have a different score for you.
Although strange, this is unfortunately perfectly normal. Some lenders will only send their information off to one bureau. For example, if you applied and were accepted for a credit card, there’s a chance the bank will report the inquiry and new credit limit to all three bureaus. Or there’s a chance it will only be sent to one or two. Or perhaps it will be sent to one bureau fairly soon and maybe another bureau months from now. It all depends on the lender.
One example that happened to me is when I applied for a loan through my credit union for a car. I knew my credit score was in the right range for a certain percentage but when they pulled my score, it was lower than what I claimed. Turns out the score I was thinking of was TransUnion’s score whereas they looked at my Experian score instead. Luckily in my case, my score was only a few points less. From what I’ve heard, there is a chance one bureau’s score may be drastically different than the other which. If this is the case, there are a few things you can do in order to make sure they’re as consistent as possible.
Your credit score is essentially a grade for your trustworthiness so treat it delicately. Like a small flame, you’d like to see turn into a roaring fire. Poor credit can prevent you from being approved for that car you wanted, a credit card to help with some expenses, or even from being approved for an apartment.
Now that you have a general idea of what credit is and the factors that go into scoring it, I’d like to give some tips on how to start building credit, in-depth explanation on factors affecting your credit score, and my two cents on your credit score!
