Which Free Credit Report Service Gives the Most Accurate Credit Score?

January 21, 2020

 

The old adage about credit scores is that if you take care of your credit, then your credit will take care of you.

Still, there is a decidedly Secret Santa-esque quality to the logistics concerning official FICO credit scores, how they are calculated, and how many you actually have.

You might know that you have a FICO credit score and are legally required to have free annual access to it.

Did you know that in reality you may actually have at least three credit scores?

That is because there are three major credit score ranking bureaus that give out credit scores according to your credit history.

Also, there are numerous other smaller and middle-sized credit scoring bureaus.

Just to make the situation a little more confusing, you might actually have more than three credit scores.

You must keep in mind that when credit scores are being discussed, I am discussing FICO credit scores. There is a difference between FICO credit scores and, “educational credit scores that you should be aware of.

Still, its relatively easier to remember the three major credit scoring bureaus, Equifax, Experian, and TransUnion, calculate your score via the FICO system.

In fact, over 90% of creditors and lenders exclusively use FICO credit scores to gauge the creditworthiness and financial risk of applicants.

If all of this information is the case, then which free credit report service provides the most accurate credit score?

Well, I am sorry to inform that you that the answer is vague at best and kind of unanswerable at worst.

It all mainly comes down to perspective, who is requesting the credit score, and the when the request is made.

The most accurate credit score, relative to your personal financial circumstances, is relative to the perspective of who is asking for it.

Like your potential lender.

What is a FICO Score?

Before we talk about the most accurate credit score, and how to determine such, let’s discuss FICO scores, FICO scores vs educational credit scores, the three credit score bureaus, and why there are three of them.

The FICO score, originally developed by the Fair Isaac Corporation in 1956, essentially provides an industry recognized credit score report standard for analyzing applicant risk.

A FICO score is basically a summary of your entire credit history.

No one outside of the credit scoring industry know the exact formula, metrics, or algorithms that go into determining a FICO credit score.

Your FICO score is a three-digit metric score that instantly tells a creditor how risky you are as an applicant.

Your FICO score also determines the amount of money you can borrow, how long you have to repay a loan, and the severity of interest rates.

A healthy FICO score is the main determining factor when you apply for a mortgage, car loan, or bank loan.

There are utility and insurance companies that may check your FICO score to establish terms of service.

OK. So, What is a Good FICO Credit Score?

Your FICO credit score has three digits. An instantaneous glance tells a lender whether or not they should extend a loan to you.

580 – This is a poor credit score. Any score under 580 says that you a risk to lenders and are not likely to repay a loan.

580 through 669 – This is a fair credit score. It’s a below average for most lenders and signals that you are a moderate risk for loan extension.

670 through 739 – This is a good credit score. It’s an above average score that tells lenders you are a safe risk for a loan.

740 through 799 – This is a very good credit score. This score is well above average and tells lenders that you are dependable and more than likely to repay loans.

800 through 850 – This is an excellent credit score. Most lenders would not be concerned about extending you a loan or credit.

FICO Vs Educational Credit Scores

The three main credit scoring bureaus rely on FICO credit scores to make their credit scoring decisions.

You may have three FICO credit scores, but each bureau uses information from FICO to calculate their scores.

When you refer to your credit score you should always look for the, “FICO,” designation.

Most people may not know the difference between a non-FICO credit score and a FICO score.

Non-FICO scores utilize different calculating algorithms. The scoring system is incongruent with the FICO system.

This is turn means that creditworthiness cannot be easily estimated relative to the FICO industry standard system.

Remember, over 90% of creditors and lenders refer to FICO scores when leveraging their decision-making processes.

The Three Credit Score Bureaus

Why are there three credit scoring bureaus?

No one really knows.

In the beginning, it might have been to effectively serve different geographic regions.

Nevertheless, you have three credit scores issued by Equifax, Experian, and TransUnion, at the very least.

So, which one is the most accurate?

The Perspective of Accuracy

There are several factors that determine which of your credit scores is the most accurate.

Mostly, the credit score with the least errors (whether we are talking about one or three) is the most accurate.

About one in five credit scores have one or multiple errors on it. Many people are unaware of them because they don’t check their credit reports regularly.

Accuracy in terms of a credit score is a matter of perspective in the eyes of the beholder.

Creditors and lenders can choose from the three major credit scoring bureaus, or rather from your three credit scores, from which to make their decisions.

So, which credit score looks the most accurate to creditors and lenders?

The credit score with the most negative or positive information is by default the most accurate one to a creditor or lender.

Just as each credit scoring bureau has their own calculating algorithm to determine credit scores, each creditor or lender can choose a credit score that aids their own lending decisions and calculations relative to their applicants.

If you are aware of your credit scores from Equifax, Experian, and TransUnion, you can apply to lenders according to the scores you prefer.

However, your potential lender can choose one of your three scores that they prefer which could conflict with the score you presented on your application.

Accuracy, and perspective, is in the eye of the beholder.

Take the Initiative on Perspective of Accuracy

In short, your accurate credit score is the one with the most negative or positive information as it relates to the preferred application calculation standards of your potential lender.

Your potential lender determines which of your credit scores are the most accurate.

You don’t have much control in determining which of your credit scores, whether one or three, is the most accurate when it comes to lenders.

There are a few things you can do.

Check your credit score every year. You are legally entitled to that right from each of the three major credit scoring bureaus.

Make sure that they are free of errors. The more errors on your credit report, the more negative it will look.

And in turn, the more accurate it will look to a potential lender.

Most credit cards have perks that allow you to check your credit score monthly on the bill or regularly by request, so check for that.

The best thing you can do is pay your balances in full and on time. Make responsible use of your credit cards the most accurate thing that can be reported on your credit history.

Which in turn will be accurately reported through your credit score.

Read More

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