Maintaining a good credit score is an essential component of your financial well-being. A high credit score is integral in order to finance a home or a car purchase, or to secure a new credit card or line of credit. That said, the credit scoring process is still a mystery for most consumers. To complicate matters, your credit score may be different with different bureaus, so which score is best?
Frequently Asked Questions
Equifax and TransUnion each use a different system and set of criteria to calculate your credit score. Therefore, neither one is truly “better,” they are just different. Since each bureau takes into account a different timeline of your credit history, depending on your circumstances, your score may be higher with one than the other.
For example, if you once had bad credit but have worked hard in recent years to maintain regular credit payments, your score via TransUnion may be higher since it only looks at the past two years of your history. If the situation was reversed, you may score higher via Equifax, since their system can look at up to 81 months of your credit history, showing a larger overall timeframe which may benefit those whose recent credit history has taken a hit.
In addition, not all banks report to both credit bureaus, which can impact your credit score with one service more than another.
There is a difference between Equifax and TransUnion scores because each bureau uses their own proprietary system to calculate your score. Equifax uses the Equifax Risk Score, while TransUnion employs the Credit Vision Scoring system. Each bureau uses a different credit timeline to calculate your credit score (generally 24 months with TransUnion and up to 81 months with Equifax). In addition, not every bank reports to both Equifax and TransUnion. If your bank doesn’t report to a service, you won’t get a complete picture of your credit history—an important aspect to keep in mind when considering your credit score.
The primary way to improve your credit score is to pay your bills on time. Skipping a bill for even one month can have a negative impact on your credit score. If you can’t pay your bill in full during a given month, be sure to at least pay the monthly minimum. If that is an issue, you should immediately call the company issuing the bill and make a payment plan to ensure your credit score stays on track.
Another important aspect of maintaining a high credit score is limiting the amount you owe vs. the total amount of credit available to you. It’s generally recommended to not exceed 35% of your potential credit; a higher percentage will negatively affect your credit score as lenders will consider you a credit risk.
To improve your credit score, you will also want to limit the amount of credit checks performed. Every time you apply for a new credit card or a loan, the lender will check on your credit report (a “hard” check). Those requests are tallied, and each one can make a dent on your overall credit score, so you will want to keep those requests to the bare minimum. You can still check your credit score without it affecting your overall credit (a“soft check”) through apps such as Borrowell, Credit Karma and Mogo.
While you want to limit the amount of credit checks on your account, having more than one source of credit can also improve your credit rating. In addition to a credit card, you can explore opening a line of credit, which will also generally have a much lower interest rate than a credit card.