How to Understand Credit Scores

Your credit score is a three-digit number that relates to how likely you are to repay debt. Banks and lenders use it to decide whether they’ll approve you for a credit card or loan. But did you know you actually have more than one credit score?

How credit scores are created

The three main credit bureaus – Equifax, Experian and TransUnion – create your credit reports, which credit scoring models like VantageScore and FICO use to come up with a score that typically ranges from 300-850. The credit bureaus can also calculate scores for you based on their own proprietary models.

Your scores are typically based on things like how often you make payments on time and how many accounts you have in good standing.

Your score will never factor in personal information like your race, gender, religion, marital status or national origin.

illustration of an industrial complex generating a credit score

Why you could have different scores

With so many ways to calculate credit scores, it’s not uncommon to have multiple different scores at the same time.

You could have different scores if a lender doesn’t report to all three credit bureaus or reports updates to them at different times. Some lenders may only report to one or two bureaus (or none at all).

You could also have different scores depending on the lending situation. For example, an auto lender might use one scoring model, while a mortgage lender uses another.

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Scoring models – what’s the difference?

Equifax, Experian and TransUnion collaborated to create VantageScore to offer more scoring consistency among the bureaus.

VantageScore boasts that its 3.0 model can score millions more people than other models by incorporating up to 24 months of past credit activity – including utility and rent payments where available – which could open up more credit options to you.

VantageScore has three scoring models and FICO has many more, but they all generally consider similar factors to calculate your scores, such as:

  • Your payment history
  • How long you’ve had credit
  • The types of credit you have (credit cards, auto loans, student loans, mortgages, etc.)
  • Your credit limits and how much of those limits you’re using
  • How much debt you have
  • Hard inquiries on your credit report

The bottom line: Your scores may vary, but they’re all based on the information in your credit reports. Checking your reports regularly can help you see what’s impacting your score so you know where you could improve.

illustration of an industrial complex generating two credit scores

Your scores on Credit Karma

Credit Karma shows your scores from Equifax and TransUnion, calculated using VantageScore 3.0. It’s free and there’s no impact to your credit.

On Credit Karma, you can also get your reports from Equifax and TransUnion for free. Your scores and reports can be updated weekly, which could help you spot signs of possible identity theft more quickly.

Credit Karma will always be 100% free. We’ll never ask for your credit card information.

Now that you know more about credit scores, get your free scores and see where you stand.

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