Understanding your credit score
Monitoring your FICO score is very important. But have ever noticed you have different FICO scores?
Once you move to the US, you will quickly learn that having a good credit score can open many doors: better points, better mortgage, better deposits for apartment rentals. That is why many banks and financial institutions will allow you to check and monitor your credit score on their mobile app or website. Other companies such as Credit Karma, CreditSesame and the Credit Bureaus also provide similar services. Nevertheless, have you ever noticed that you have different FICO scores in almost every place you check?
Why do I see different FICO Scores?
The first intuition is that there might be different FICO scores for each of the 3 bureaus. That, however, does not explain why we recall seeing a 770 and a 651 at the same time, for the same bureau.
The answer is not very intuitive: every one of us actually has more than 50 different FICO scores. Each bureau has more than 15+ different FICO scores for every individual. Think of it like different versions: 1.0, 2.0, 3.0 in which FICO. In every version the bureaus change the importance of different attributes (like the weight of the number of years of your credit history). In addition, they also have some industry specific scores: for auto, mortgage, credit card, etc. And financial institutions can choose which of those 50+ versions they want to use (sometimes multiple).
Why does the Bureau need all different versions?
Those different FICO scores are all attempts to optimize for different aspects and try to adapt to changes in the lending space. So typically financial institutions will choose the version that is most relevant for their business.
What to do?
The secret to improving them is the same: keep balances on your credit cards low, pay bills on time, do not apply for too many cards or credit accounts. This should impact all of your different FICO scores.
Why should you care?
It is important to check your credit score in more than 1 place to help paint a better picture. Understanding your different FICO scores will help you understand the chances of getting approved for different things.