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Learn where your score comes from, about the three credit bureaus, your credit reports and actions to avoid regarding your credit.

What is a Credit Score?

  • A credit score is a number determined by one of the three credit bureaus that helps assess how well you've managed your finances and obligations. Credit scores are also called "FICO Scores" because most credit bureau scores used in the U.S. are produced from software created by FICO (Fair Isaac and Company).
  • The three bureaus are Equifax, Trans Union, and Experian. Each determines your credit score a little differently so your scores will vary.
  • Also, some companies will not report your payment history to all three companies. This is another reason why you have different scores with the three bureaus.
  • Your credit score is calculated based on things like payment history, capacity (ratio of what you owe to amount of credit you have), length of credit history, types of credit (revolving-like credit cards and installments like an auto loan), and number of new accounts and inquiries.

Your Credit Report

  • Your credit report is not the same thing as your credit score. Your report contains a credit score based upon the information in that particular report. Information often varies between different reports from the three bureaus. This is one of the reasons why you have more than one credit score.
  • Your report includes your score and other important information that creditors look at such as:
    • Income
    • Payment obligations: rent/mortgage, utilities, car, medical bills, loans, etc.
    • Are your payments in line with your income?
    • Do you make your payments on time?
    • Government citations, such as parking tickets.
  • Be careful where you get your credit report and what it contains.
    • There are many online companies that offer credit reports.
    • Online credit reports are appealing because they are immediate, but may be a combination of your three reports from the three report agencies. This is not useful if you are trying to compare your reports and check for accuracy.
    • Some online companies will give you a free credit report for signing up for a credit program. Most will automatically debit your checking account and can be costly for the service it actually provides.

  • Check your credit regularly.
  • Learn more about identity theft and protecting your identity.
  • Avoid maxing out your credit cards and only making minimum payments.
  • Collections
    • It is best to communicate with collectors. Ignoring them will not make your debt disappear.
    • Accounts in collections will most likely appear on your credit report and negatively impact your score.
    • Collection Agencies will contact you frequently and try many times to collect a debt.
  • Debt Settlement, Negotiation, or Elimination Agencies
    • Some of these are schemes, so beware. If it sounds too good to be true, it probably is! Trying to settle debt using one of these companies may make your financial situation worse.
    • Settlement and Negotiation Agencies usually pay off your debts and talk to collectors for you. You pay the agency, and the agency will pay your debts. You are still responsible for late fees.
    • Debt Elimination Agencies use the false notion that credit lines are illegal. You pay a fee and the agency will give you a document that absolves you of your debt. The document has no legal validity.

The three credit reporting agencies, or bureaus, are: Equifax, Experian, and Trans Union.

Credit scores are also called "FICO Scores" because most credit bureau scores used in the U.S. are produced from software created by FICO (Fair Isaac and Company). Not all scores you can buy online are true FICO scores. FICO scores are based solely on information in consumer credit reports maintained at the three bureaus.

You have the right to obtain a free credit report annually from each of the three bureaus. It is recommended to stagger them so you can monitor your credit for free throughout the year. You can contact the agency directly, or use

  • Equifax:
  • Experian:
  • Trans Union
    • Credit Reports: 877-322-8228
    • Fraud Hotline: 800-680-7289

The FICO Score has a different name at each of the three bureaus. Because information in your credit reports can vary between bureaus, the FICO Scores may also be different.

  • Equifax: BEACON Score
  • Experian: Experian/Fair Isaac Risk Model
  • Trans Union: EMPIRICA

  • Missing payments.
  • Maxing out credit cards.
  • Closing credit cards that still have balances. When you close the account, this drops the limit to $0 while your balance is still there. This makes it seem like you have maxed out your card.
  • Similar to above is closing cards with available credit. Closing these increases your capacity ratio - the amount of credit owed against the amount of credit you have.
  • Closing old credit cards makes your history look shorter than it actually is, especially if you have closed your oldest account.
  • Revolving debt is greater than installment debt.
  • Applying for and/or opening many accounts in a short period of time.
  • Having an account charged off.
  • Having an account sent to collections.
  • Defaulting on a loan.
  • Don't think that you just have one credit report and one credit score. You have at least three different reports and at least three different scores. The information on the reports and scores can vary greatly.
  • Don't make the mistake of closing credit accounts just to improve your score. Long credit history is a score booster. Be careful to not close an account you need because you will inevitably have to reapply for credit and those inquiries will lower your score.
  • Don't assume that doing one thing (such as paying off a credit card bill) will raise your score by a certain number of points. This is a false notion because there are so many factors in determining your credit score based on all the information in your credit report.
  • Don't think that having zero debts or any loans will improve your credit score. Lenders want to see that you can handle credit responsibly.
  • Don't think your score will change immediately. Paying off a debt will not improve your score at once.