Posted by: John S Kiernan

The Myth: Many people assume we each have three, and only three, credit scores, one from each major credit bureau: TransUnion, Experian and Equifax. After all, anyone with a Social Security number who’s ever possessed either a credit card or a loan also has a credit report from each of these bureaus. So it would seem only logical for there to be three corresponding credit scores. But that, as it turns out, isn’t true.

The Fact: Having three major credit reports does not mean that we have just three credit scores. Rather, it means there are three versions of each type of credit score that we have.

Take the VantageScore 3.0 credit-score model for example. We each have one of these scores based on our TransUnion credit report, another based on our Experian credit report and a third based on our Equifax credit report. The same is true of the most popular version of the FICO score, FICO Score 8, as well as older iterations of this base score and FICO’s various industry-specific scores. There are three versions of each, though only two are available to consumers because of a spat between Experian and the Fair Isaac Corporation, the creator and namesake of the FICO score.

All in all, there are more than 1,000 different credit scores in use today.

Why You Only Need One: One of the most important things to understand about this three-by-many credit-scoring environment is that your score isn’t likely to differ much from bureau to bureau. Our three major credit reports contain largely the same information. What’s more, while differences do exist from one credit-scoring model to the next, it doesn’t really matter which model your score is based on. You won’t be seeing the same type of score a prospective lender sees, anyway, as most customize whatever scoring models they use to better suit their specific needs, whatever they may be. This process creates a final product that’s drastically different from anything you can access at home.

As a result, the best way to use your credit score is not as a direct indication of approvability for a particular account or a given rate but rather as a way to determine roughly where your credit stands and then monitor its trajectory over time. With that in mind, you can get your free credit score from WalletHub, based on the VantageScore 3.0 model and TransUnion credit-report data. Sure, there are other places to either buy a credit score or order one for free, and you can compare them here. But our admittedly biased belief is that WalletHub represents the best option because our scores update on a daily basis rather than the weekly-to-quarterly schedules on which all other providers operate.

Ask the Experts: 3-Score Monty

To learn more about the numerous credit scores each of us has, and the confusion that naturally causes, WalletHub asked a panel of money-management pros to share their thoughts on the following questions. See who they are and what tips they have, below.

• Do you think the average person knows they have more than one credit score?
• What do you think confuses people most about credit scores based on different bureaus’ credit reports?
• Do you think it’s important to check more than one type of credit score?
• What’s your favorite credit score tip?

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• John R. Salter Associate Chair and Associate Professor in the Department of Personal Financial Planning at Texas Tech University
• Terry E. Rumker Certified Financial Planner, Director of the Eagle Investment Group and Assistant Professor of Finance in the College of Business and Economics at Ashland University
• Carol Wang Associate Professor of Finance & Financial Services at Wright State University
• Sam Heinrich Associate Professor of Business and Department Head of Online Undergraduate Business at John Brown University
• Ian M. Dunham Assistant Professor of Business & Society and Sustainable Business in the College of Business at San Francisco State University
• Jaycob Arbogast Coordinator for the Center for Excellence in Finance at California State University, Chico
• Cheryl Clark Professor of Accounting at Point Park University
• Paul L. Camp Professor and Chair, Department of Finance, Metropolitan State University of Denver

John R. Salter Associate Chair and Associate Professor in the Department of Personal Financial Planning at Texas Tech University Do you think the average person knows they have more than one credit score? I would guess likely not, as I’m sure most people first find out when they apply for credit and receive multiple scores. What do you think confuses people most about credit scores based on different bureaus’ credit reports? Why the scores are different, since different debtors report to different agencies. Do you think it’s important to check more than one type of credit score? Yes. First, a potential debtor may only pull one of the reporting agencies, and second, as noted above, different debtors report to different agencies. What’s your favorite credit score tip? Other than paying bills on time and not using all of your revolving credit monthly, check your report annually using the free service. Be sure everything looks correct, and there is nothing erroneously reported. Checking every year can also be a good way to catch any identity theft issues, which can have a negative impact on credit score. Terry E. Rumker Certified Financial Planner, Director of the Eagle Investment Group and Assistant Professor of Finance in the College of Business and Economics at Ashland University Do you think the average person knows they have more than one credit score? I think many more people know their score now than years past. However, the majority of the population is probably not paying enough attention to their score and the financial ramifications of not doing so. What do you think confuses people most about credit scores based on different bureaus’ credit reports? Many don't understand the areas of their lives which are used to evaluate if they are a low or high credit risk. Most individuals know they should be striving for a higher number, but are not sure what a really strong score or poor score might be. Do you think it’s important to check more than one type of credit score? It would always be a good idea to check your score from various sources, because there may be some activity that has been reported to or picked up by one agency but not the other. What’s your favorite credit score tip? Pay all your bills on time. Paying late not only hurts your credit score, but it also costs you more money with the late fees that get added to your balance, on top of the additional interest expense. Carol Wang Associate Professor of Finance & Financial Services at Wright State University Do you think the average person knows they have more than one credit score? No. What do you think confuses people most about credit scores based on different bureaus’ credit reports? Detailed measurements of credit score used by different bureaus. Do you think it’s important to check more than one type of credit score? Yes. What’s your favorite credit score tip? Keep a reasonable personal budgeting and planning, to avoid unnecessary spending beyond income. Sam Heinrich Associate Professor of Business and Department Head of Online Undergraduate Business at John Brown University Do you think the average person knows they have more than one credit score? I teach a class that includes a personal finance element, and we cover FICO scores and the credit reporting system. In general, my students and I suspect that most consumers are not aware there are three reporting agencies and that creditors may choose to rely on any of the three, or some combination of the three. What do you think confuses people most about credit scores based on different bureaus’ credit reports? In general, most do not understand what level of score represents a good score and the elements that go into the analysis. They also do not understand that creditors do not always report information to all three credit bureaus, so unique information and unique scores may be reported by the three bureaus. What’s your favorite credit score tip? I try to help those new to credit to understand what goes into, and what does not go into a credit report, as well as how to initially establish credit. For example, rent payments are not typically included, but a judgement for an unpaid bill will be. Another tip -- income is not a consideration. Credit scores reflect payment history on debt and public judgements, not your capacity to make payments. Lastly, a high credit score is not a license to borrow. Consumers need to make their own purchase decisions, and obligate themselves to additional debt based on their own budgetary analysis. Vendors have a vested interest in qualifying a consumer for the debt to consummate a sale. The sales representative or finance expert is the last party a consumer should rely upon in a purchase or a debt obligation decision. Ian M. Dunham Assistant Professor of Business & Society and Sustainable Business in the College of Business at San Francisco State University Do you think the average person knows they have more than one credit score? Consumer finance is typically not a priority until it is time to obtain a line of credit to make a large purchase. Even assuming a basic level of financial literacy, it is unlikely that the average consumer is fully aware that they have more than one credit score. What do you think confuses people most about credit scores based on different bureaus’ credit reports? Credit is viewed as a gateway to “the good life,” if used wisely; however, many consumers may view the credit building process as non-transparent. A lack of understanding of how credit scores are calculated may be a source of confusion. Do not assume that your information is reported to all three credit bureaus equally, correctly, or at the same time. Do you think it's important to check more than one type of credit score? Yes. The three nationwide credit bureaus are required to provide you with a free copy of your credit report once every 12 months, at your request. Confirm that your information is accurate and that there are no significant discrepancies between the three reports. What’s your favorite credit score tip? Contrary to popular belief, carrying a balance will not improve credit scores. If possible, make sure to pay off the entire balance of all of your bills every month, including utility, medical and credit card bills. Setting up autopay is an easy way to ensure that you never miss a payment. Jaycob Arbogast Coordinator for the Center for Excellence in Finance at California State University, Chico Do you think the average person knows they have more than one credit score? With the Equifax breach being so public, I think most people are aware that the big three credit agencies are tracking all of our financial history. Most people probably aren't aware that the data could be different among each of the three, though. For example, a lender has to pay to be allowed to report to, or pull information from, a credit agency. Smaller institutions often choose to only report to one agency, rather than have a membership with all three. Because of this, each of the agencies may have different information about you. One past client of mine had an unpaid parking ticket that was reported to TransUnion, but it was never reported to Equifax or Experian. With this difference in data, your credit score could vary drastically between the three agencies. This also means that a lender could look at only one score, and not see all three of them. So, if your lender happens to see the score that has all of the delinquent accounts, then you may lose out on your loan, even if you thought you had a good score. What do you think confuses people most about credit scores based on different bureaus’ credit reports? The big three credit agencies (Equifax, TransUnion, and Experian) format their reports differently, which can cause some confusion for people if they are trying to compare information between the three of them. For example, TransUnion will report the standing of your account each month for as long as the account has been active. You'll likely see a series of green "OK" marks on your TransUnion report if everything is going well. Experian, on the other hand, doesn't list each month in a table the same way. They put a statement on the file that says "Accounts in Good Standing" and list the applicable accounts. This causes some confusion for people who aren't used to seeing the different credit reports and the varying formats. I usually recommend to take the time to read each section carefully, understand what it says, and check to make sure nothing seems out of the ordinary to you. Do you think it’s important to check more than one type of credit score? I always recommend that people check their score regularly. The usual advice is to pull your credit score every four months and rotate which agency you check with. Federal law allows all U.S. consumers to check their credit score for free once per year from each of the big three credit agencies. Most people think about checking their score from paid providers, but this isn't always necessary. There are plenty of free options available to consumers. WalletHub is a popular choice, and even Discover has started offering free credit scores to the public. Sometimes, it's a good idea to check all three of your scores at the same time, especially if you expect to apply for a loan in the near future. But if you do decide to check all three at once, you'll have used your free check for the whole year. You'll have to wait another year if you want to check any of your scores for free again. What’s your favorite credit score tip? When it comes to credit tips, it helps to know some background about your score. Your credit score is made up of five parts:

• Payment history -- how many payments you've missed since you opened the account;

• Utilization -- how much of your available credit have you used;

• Length of history -- how long you've had credit accounts in your name;

• New credit -- the number of new accounts that have recently been opened;

• Credit mix -- the number of different kinds of accounts you have (e.g., a car loan vs a student loan).

With that in mind, payment history is the largest part of your score, so not missing a payment will have the best effect on your score. But it's very easy to lower your score as well. Both the new credit and length of history sections will be affected by opening a new account. Not only that, but the new account won't have any payment history on it yet either, so your score won't have any way to go up. The best bet for increasing your score is to make your payments on time, and not open new accounts if you can help it. My next best tip is that there are a lot of credit repair companies offering to fix your credit score for a fee. This may be a good way to go, but there are many scams as well. By the Credit Repair Organizations Act, a credit repair company isn't allowed to charge you up front for their service, so if you find a credit agency that charges you a thousand dollars to fix your credit before they even start working, you should move on. Disclosures: Jaycob Arbogast is a Registered Investment Adviser (RIA) and the Coordinator for the Center for Excellence in Finance at California State University, Chico. Jaycob has no affiliation with any of the three credit agencies or credit information providers referenced above. Cheryl Clark Professor of Accounting at Point Park University Do you think the average person knows they have more than one credit score? I don’t think the average person thinks about credit scores much until they are trying to get credit. The fact that there are various credit scores based on who is doing the calculation, what type of data they are using and who is using the information is simply not something most people think about until they need to. The most popular credit score is called the FICO score, and this is the score that the three major credit bureaus report. What do you think confuses people most about credit scores based on different bureaus’ credit reports? I think what confuses people most is that the three credit scores can be different, but they all are called the same thing -- a credit score. The reality is that the data that each credit bureau collects can be different, and this is one reason why the scores can be different. Do you think it’s important to check more than one type of credit score? I think it is. For example, it would be good to know if the credit scores between the three bureaus are relatively the same, or relatively different. If they are different, it would be good to understand why, so that you can head off any potential issues in the future. What’s your favorite credit score tip? My favorite credit score tip is simply to know what your personal credit score (FICO score) is, so that you can monitor it for changes over time and identify actions that you can take to improve it. Paul L. Camp Professor and Chair, Department of Finance, Metropolitan State University of Denver

Do you think the average person knows they have more than one credit score?

I think the answers to 1 & 2 are probably related. No, I don’t think that the average person knows they have more than 1 credit score. I think the natural assumption when people hear about “their credit score” is that there is 1 number that represents their credit risk and not multiple scores from any of three different sources. And I think that’s also probably the major source of confusion, a lack of understanding of how the same information about their credit history can be used in different ways to get three different numbers. While it’s true the numbers convey the same basic information for lenders, the difference in scaling and the mathematics behind how the scores are calculated have to be confusing. We try to address some of that in our coursework here (basic personal finance) which is offered on an elective basis. I think most schools probably have intro courses comparable to ours, so the information is out there but you have to be sufficiently motivated to go get it.

Do you think it’s important to check more than one type of credit score?

I don’t think it’s particularly useful to check more than 1 credit SCORE, because each of them is calculated differently. It makes more sense to me to follow only 1, and make sure that number is steadily tracking higher over time. Sometimes too much information is confusing and as long as you’re managing your credit well, all three scores should be increasing, just at different rates.

What’s your favorite credit score tip?

I think the easiest tip is the simplest: there’s really no shortcut or silver bullet that’s going to “repair” your credit overnight, despite what the marketers say. If your credit score is below average, it probably took a while to get there. Fixing it is no different; pay your bills on time every time, don’t borrow unless you absolutely need to and your score will reflect that. But repairs take time. That’s the bad news. The good news is that there’s no need to pay a third party, you can do this yourself over time but it takes a steady hand and discipline.

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