Family Resource Management
Living for Today — Planning for Tomorrow
News You Can Use
Different Credit Scores
Credit scoring is a very important, but often confusing, issue for consumers who often ask, “Why do I have several different credit scores?” To answer this question, we first need to understand what credits scores are and who provides them.
Credit scoring is a tool used by mortgage lenders and other creditors to evaluate the risk of lending to a particular consumer. They help lenders predict how likely you are to pay your bills.
Credit scores, usually ranging between 350 and 850, are computed using statistical models based on loan repayment histories of thousands of other consumers. Each consumer reporting agency (or credit bureau) has its own brand name and statistical model for scores based on the information in their credit files.
Since the information on one individual may vary from one credit bureau to another, and calculation models may vary somewhat, credit scores may also vary. To further confuse the issue, the credit score provided to lenders by one company may be different from the credit score sold to consumers by the same credit bureau.
People who have high credit scores usually qualify for loans with the best terms and lowest interest rates. To get high scores:
- Get a free credit report from each credit bureau each year to check the accuracy of the information included on you by calling 1-877-322-8228 or visiting www.annualcreditreport.com. If you find errors on your report, have them corrected promptly. It’s free and it’s your right.
- Pay bills on time.
- Keep balances low.
- Don’t cancel old accounts, since part of your score is based on the length (in years) of your credit history.
- Have a good mix of types of credit, such as a mortgage, auto loan, store credit card, gas card. Showing that you can handle different types of credit is good.
- Don’t apply for several types of credit in a short period.
For more information on credit scoring or a program for your local group, contact your Mississippi State University Extension Service County Office and ask for your Family Resource Management Area Agent or visit these websites:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.pdf
http://msucares.com/pubs/publications/p2399.pdf
http://msucares.com/pubs/publications/p2372.pdf
