Here’s a wild idea: Ignore your credit score
Despite a barrage of television ads promising you a free “credit score” (which is really just a ploy to get you to buy an unnecessary "membership"), there really is no such thing as your official credit score.
You don’t have just one; you have hundreds of credit scores, each created by a scoring company and tailored to the type of lender buying your score.
Thanks to all those free credit score promotions, however, it’s easy to see a bunch of them.
Discover is putting credit scores on customers’ monthly statements, while Barclaycard and First Bankcard are putting them on websites customers can access.
Because there are so many different credit score products on the market, if you got your score from all of those sources, you might see different numbers from each.
What’s more, the scores you see might not be the same credit scores your mortgage lender or your auto lender would see.
Different credit scores pinpoint the likelihood that you’ll pay back different types of credit, said Rod Griffin, director of public education for Experian, one of the three big credit bureaus.
Those different credit scores don’t transfer from one type of lender to another, either. “You can’t go to your mortgage lender and get a score and then take that score to a car dealer and say give me a car loan because my mortgage score is so good,” Griffin says.
Different scores also have different scales to measure what’s excellent credit and what’s poor credit. You can have a 285 from one score and a 750 from another, and they can mean the same thing. “Don’t get too hung up on the number. You have to know what it means in terms of risk,” Griffin says.
What’s more, credit scores are constantly updated and always changing. Today’s score will be different from next week’s score if you take an action that influences your credit, like paying off a high credit card balance.
If we all have hundreds of credit scores, do we need to worry about all of them? Is it even possible to check them all? Probably not, says John Ulzheimer, consumer credit expert at CreditSesame.com.
“If you, as a consumer, tried to go out and manage every single one of your credit scores being used by utility providers, insurers and your lenders, you’d drive yourself crazy,” he says.
While you have hundreds of credit scores, you only have three credit reports. The information about you that’s in those three credit reports is what companies use to calculate the credit scores they sell to lenders, Ulzheimer says.
“You can’t control your score, but you can manage your credit report,” Ulzheimer says. “Pay on time, keep your balances low, only apply for credit when you need it and don’t use credit excessively.”
Here’s another interesting thing to know about credit scores: Every score comes with a list of your risk factors.
“Those risk factors tell you what you need to improve to increase your score,” Griffin says.
The risk factors are consistent from one score to the next. Address your risk factors and eventually all of your scores will improve.
The most common risk factors are late payments and having balances that are high compared to your credit limits. For example, having even one credit card maxed out can lower any type of credit score.
The only time the exact number on a particular credit score truly matters is when you’re trying to qualify for a particular type of loan and you just barely miss the minimum required score.
If you’re applying for a Fannie Mae loan, for example, your lender has to use a FICO 8 score, Ulzheimer says. If the cutoff to qualify for the loan is a FICO 8 score of 620 and you have a FICO 8 score of 610, you’re out of luck until you can raise that FICO 8 score.
In a situation like that, your loan officer will typically go over your risk factors with you and figure out what you need to do to get your credit score where it needs to be.
Enjoy your free credit scores when they’re offered, but don’t get hung up on them. You’re so much more than a number — you’re hundreds of numbers.