So, you have finally decided to get serious about credit repair. You work hard to pay down debt, get your credit utilization ratio in order, and review a copy of your credit report. All is well, right? Perhaps not. Unless you are reviewing reports from each credit bureau—TransUnion, Experian, and Equifax—you may not be getting the whole story. Each company has their own methods of scoring—a fact that could help or hurt you. Why might your credit scores be different? Read on to learn more.
Reason #1: Different credit scoring models. On the path to credit repair, there are a few basic rules for a healthier score:
- Lower debt
- A long (and steady) credit history
- Timely bill payments
- Experience with new credit
- Credit diversity
Outside of these rules lies the push and pull of scoring models. Each credit bureau follows its own set of guidelines for weighing your credit score. While all three bureaus contract with Fair Isaac Corporation for access to their famous FICO scoring algorithms, each of them buys a slightly different version. The result is, obviously, variation between your three resultant credit scores. For example, although a negative item could reduce your Experian credit score by 10 points, it may cost you 15 on your Equifax report, or, in other cases, vice versa. Your best bet? Avoid negative items altogether.
Reason #2: Same person, different stories. To get all the facts, it is important to check each of your credit reports thoroughly. Unfortunately, you may find that some of your information is missing. Many lenders develop relationships with a single credit bureau, reporting to them exclusively in exchange for discounted customer information. While this arrangement works perfectly for the involved parties, the other credit bureaus may not be getting the whole story either. For example, Marise just opened a new credit account at a popular department store. She has been busy redecorating her office, buying new furniture and paying off her bill at the end of each month. Since the department store reports exclusively to TransUnion, Marise’s score benefits from her responsible spending. However, Experian and Equifax are not aware of the new account, preventing them from adding it to her other credit reports. If you, like Marise, hope to achieve complete credit repair, make a list of all your active accounts and verify their presence on each credit report. If one is missing, contact your lender and ask them to give the competition a heads-up.
Reason #3: Human error. Everyone makes mistakes—even credit bureau employees. Despite their best efforts, a simple misspelling, account duplicate, or wrong address could find its way to your credit report. Comb through the details of each report and look for incorrect information. While it is possible for the same mistake to appear on each report, credit bureaus employ their own staffs and work under their own guidelines. Don’t give into complacency: give each score the attention it deserves.
Although complete credit repair may seem more complicated, understanding the practices of each bureau can only help your cause. Make a commitment to your future, and work to repair all three scores wherever possible. You never know which one you’ll need.