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If you’ve ever applied to borrow money for a car loan a mortgage, or applied for a credit card, you’re well aware that you have a credit score. Although we refer to our credit score as one number out of 850 points, you may or may not know that you actually have different credit scores—three credit scores, actually.
Yep, that’s confusing—but it’s true. Each person has (at least) three different credit scores.
These different credit scores come from each of the major credit rating bureaus. Even though these scores are all rated out of 850, because of the way different credit bureaus gather information, those three numbers won’t be exactly the same.
To make things even more confusing, business owners generally have more than three credit scores, too. You’ll need this info when you apply for a small business loan.
We know this all sounds a little insane—so, naturally, you’ll have some questions about it. We’ll unpack why you have different credit scores, how many different credit scores you have, and what all of this information means for you as a consumer and a small business owner.
You have three different credit scores because there are three major credit rating bureaus most commonly used to assess an individual’s creditworthiness. Each credit rating bureau relies on different algorithms that weigh all the same information but with varying degrees of importance. And that’s what results in different numbers—and, subsequently, different scores.
The top three credit reporting agencies aren’t the only ones creating credit scores. In fact, hundreds of other companies out there are creating credit ratings and assigning scores to individuals, some even include background checks. Still, the most common credit scores you’ll see are from the major bureaus: Equifax, TransUnion, or Experian.
Next time you apply for a job, mortgage, car, or other loan of some sort—including the majority of business loans—be prepared that the lender will pull your credit report, examine your credit score, and evaluate your candidacy with your credit score in mind.
Although most credit rating bureaus use different algorithms to come to your credit score, most of these scores fall on the same scale and range. Your credit score will most often range from 300 to 850, with a higher number signifying better creditworthiness.
Here’s a table of how credit scores are considered:
As an individual, the most important thing for you to know is that you can request a free credit report from each of the three major credit bureaus once per year. This means you can monitor your credit score and check for any credit history errors for free. Where your credit score falls on this table will determine how eligible you are for credit products in the eyes of banks. Raising your credit score can make it easier to access credit, debt, and loans.
Correcting errors in your credit report, and reporting actions that lower your credit score for which you aren’t responsible, is the best thing that you can do—and, ultimately, that’s on you.
Even though the three major credit bureaus—Experian, Equifax, and TransUnion—may give you slightly different credit scores, they all take into account the same five major factors to get to their number:
Each credit rating agency weigh these factors slightly differently, which results in differing scores. Each of the three major credit rating bureaus bases their score on FICO or VantageScore algorithms. So, depending on the version of the FICO algorithm that the agency uses, your score might differ, since the versions take each factor that goes into your score into account slightly differently to come back with your number.
But wait… there’s more! To make things even more complicated, you might see different scores depending on why you’re accessing your credit. If you’re purchasing a car, you might see your FICO Auto Score. Or if you’re looking for a mortgage, one credit bureau might rely on a different FICO algorithm that gives them a more accurate picture of whether you’re a better mortgage borrower than, say, a car loan borrower.
Having different credit bureaus and different algorithms seems like overkill, maybe. At the end of the day, though, no matter the algorithm being used or where you’re seeing your credit report, credit bureaus are using the same five factors to create that number. They’re just weighing them differently—and you don’t have to change anything on your end.
If you’re paying your bills on time, utilizing not too much of your credit limit, and only opening new credit accounts when you need to, you’ll be able to maintain a good score—no matter which bureau is reporting it and no matter which version of the algorithm they use.
To quickly recap, there are three major credit reporting bureaus that each can provide multiple different scores, not to mention the hundreds of other, smaller credit reporting bureaus. There’s no way around the fact that this is confusing.
Why is all this so important to understand?
Your credit score is a major determining factor in your ability to be able to access financing—both personally and for your business. For example, you might need to access credit to apply for:
Plus, some employers and landlords examine credit scores when assessing candidates for hiring and renting apartments. Sure, no study has proven a link between how an individual uses and manages credit and job performance, but it’s becoming more and more common for an employer to use a credit score when assessing an employee. Crazy, right?
Using credit wisely, paying your bills, and opening credit lines only when you need them is super important to maintaining a high credit score so that you can still access credit when you need to.
Five words: Consistently request your credit report.
According to the Fair Credit Reporting Act, each individual can access their credit report from the free major credit reporting bureaus for free once a year. Make sure that you’re requesting your credit report from the actual website set up by the federal government.
There are many other sites that will also offer you access to credit scores and credit reports for a cost. These will give you a good idea of your score if you need access in the moment, but the score they provide you is often not the same score that’s provided to creditors, so it’s not exact or perfect information.
The other hugely important thing you can do is to always check for errors in your credit report. It’s not enough to just request a free credit report annually—you have to make sure it doesn’t include any mistakes, too.
Brookings Institute researchers found that more than 20% of Americans have a material error on their credit report that could affect their credit score—and many don’t even know. These errors can make it harder for someone to get a loan or a business credit card, or be approved for the amount of credit that they’re eligible for.
The errors on your credit report might not be easy to fix and may even be connected to (incorrect) criminal history. Some people have found errors on their credit reports that show that they’re a terrorist or even that they’ve been declared dead. And that’s no good at all!
These errors take time, money, and proof to fix. Closely monitoring your credit report and accessing it yearly will help you to better protect yourself from mistakes, and save you labor in going backwards to remove inaccurate info that’s been on your record for years.
If you’re a small business owner, you have one more piece of information to consider on top of your three different personal credit scores. In addition to your personal credit score, you probably also have a business credit score. And, strangely enough, that’s actually entirely different.
The two major business credit score bureaus are:
Your business credit score is used to determine whether your business is eligible for trade credit, business financing, business credit cards, and other financial opportunities. Unlike personal credit, which is given a number on a scale from 300 to 850, your business credit score ranges from 0 to 100, with higher numbers signifying good credit history.
Similar to your personal credit score, you business credit score is based on your credit-use history, how many lines of credit you have, how you pay your bills, the size of your company, and how long your company has been in business.
It’s important to start building up your business credit history as a small business owner, separating it out from your personal credit. One easy way to do this? Apply for a business credit card.
See Your Business Credit Card Options
On the surface, having different credit scores—three or more!—can seem confusing and intimidating. There are a lot of factors—three major credit reporting bureaus, personal credit scores, business credit scores, and different algorithms for rating your creditworthiness. Once you realize the why, though, it strangely makes more sense than you might have thought.
If you come away with nothing else, remember that you have the power to check your credit report from your credit agencies for free annually, and to request changes be made if any improper information is reported.
Your credit score is a crucial important factor in accessing credit to do the things you want—including starting or growing a small business. So, remember to check your credit score at least annually and take steps to maintain a good score in order to maximize the opportunities available to you in the future.