Our credit scores are calculated by different credit bureaus, but confusions arise among borrowers when three different bureaus show three different scores. That is mainly because these various systems are using different scales to measure your credit scores. As a general rule, credit scores fall between 500 and 850. Good credit scores are considered those that are above 700.
There are different factors that have an impact on your credit scores, some of which include:
- Total debt
- Public records
- Type, and number of accounts
- Number and the extent of late payments
- New Credit
- Length of credit history
- Amounts owed
According to Public broadcasting service, the standard credit score system (FICO) was developed in 1989 by Fair Isaac Corporation. This system assigns point to the borrower based on the features that affect the credit. The total number of points will then decide the creditworthiness of a person or a business. This would then help people in acquiring loans to start a business or to get personal unsecured loans. The credit score is also a great way of understanding where a person or a business stands, financially – it determines their creditworthiness.
Following are the reasons behind your encounter with different credit scores by different bureaus:
- It doesn’t take long for scores to change; therefore your credit score this month, and for next month, is likely to be different.
- When different scoring models are used, you get varying credit reports.
- Another reason the scores vary among different bureaus is because, all or some of them, hold incomplete credit report information. Lenders send information regarding loans to the bureaus. The bureaus, based on this report, calculate credit scores.
It’s imperative that you always keep your credit scores high. A good credit score will allow you to be successful in your business and be able to have access to borrowing.
You need to buy machinery for your business? You can get a loan within days at low interest rates. You need to buy a car because your family is getting big? You can get the loan at rates as low as 6.58%.