Credit Reports: How Many Do I Have?
If you’ve recently applied for mortgage loans, credit cards or a new job, you may have heard terms like FICO scores or credit reports being discussed and wondered what they meant and why they are important. Essentially, we all have three FICO scores and three credit reports generated from the three biggest credit bureaus. Let’s unravel the mysteries surrounding credit scores and reports.
How Credit Bureaus Started
The first credit bureaus of sorts started more than 10 decades ago. Merchants began keeping paper notes on whether their customers paid their debts. Eventually, this information was accumulated and maintained locally at small credit bureaus. Today, the main purpose of a bureau is to provide a history of an individual’s credit and determine whether individuals are good credit risks.
Once computers came into the picture, three large credit bureaus were established. TransUnion handles the central US, Equifax covers the east and the southern portion and Experian is responsible for the west.
How Credit Bureaus Work
Even though bureaus are set up in different parts of the country, creditors or lenders can report to any or all bureaus. Any time you take out a loan, pay on a revolving charge or make financial payments, creditors report this information to the bureaus.
Over time, this information creates a financial credit history of what amounts you pay, who you pay and whether, you pay on time. A bureau takes this information and converts it into a formula, which creates a credit score also known as a FICO score (Fair Isaac Corporation).
Your credit history and score is often combined into a credit report. When you go to apply for a loan, a job, credit cards, new insurance or any number of financial commitments, the insurer, lender or bank may pull a credit report or credit score. They are trying to decide if you pay your bills on time and are responsible.
You need to understand that each of these bureaus may receive different credit information depending upon who the lender chose to report to. Each bureau also operates independently, and they all calculate FICO scores with their own scoring models. Therefore, it’s highly possible for all your reports to contain different credit information, and your score at each credit agency might be different.
Maintaining Good Credit
You can avoid problems when you apply for financing, insurance or apartment rentals by maintaining good credit with these tips:
• Pay every bill on time.
• Don’t run credit cards up to the limit.
• Avoid opening an excessive number of charge cards.
• Don’t default on financial loans or claim bankruptcy.
Checking credit reports yearly can prevent problems in the future. This gives you an opportunity to see your credit standing, report errors and check for fraud.