A number of factors affect credit scores --- even consumers who consider themselves financially responsible may inadvertently be lowering their scores. However, one of the biggest credit myths is that consumers only have three scores generated by three major credit-reporting companies. Consumer credit scores actually vary among creditors and lenders.
Scoring Models
You may have any number of credit scores, depending on how creditors and lenders handle their credit checks. Consumers often check their scores with three well-known credit-reporting companies: Experian, Equifax and TransUnion. Tracking your scores with those companies may give you a broad idea of your credit rating. However, the score a creditor or lender sees is likely different because credit-scoring models vary. For example, mortgage lenders often check FICO credit scores, and a consumer's payment history with creditors and lenders accounts for 35 percent of that score. Yet payment history affects 32 percent of the VantageScore that was developed by Experian, Equifax and TransUnion.
Payment History and Debt Load
Paying all of your bills on time creates an excellent payment history with creditors and lenders that helps boost your credit score, but that doesn't guarantee you'll have a high score. Credit-scoring models take other factors into account that may drag down your score. For instance, the amount of debt you owe affects 30 percent of your FICO score. Financial advisers often recommend that consumers use no more than 30 percent of their credit lines at all times to prevent a drop in their credit scores.
Creditworthiness
Not using credit cards or not taking out loans won't give you a stellar credit score. Credit scores are a measure of how people manage their finances --- therefore, consumers need to pay off credit cards or loans to establish a financial track record and credit score that represents their creditworthiness. People who don't have credit histories often can't get home loans, rent apartments or buy cars without having a co-signer with a satisfactory credit rating on their loan or lease applications.
Married Couples
Spouses have separate credit ratings, so an individual who has a poor credit history doesn't automatically establish a desirable credit score by marrying someone who has a high score. However, spouses who establish joint accounts for credit cards, a mortgage or other loans share the financial information from those accounts. Therefore, the credit scores of both spouses may increase if they manage their joint accounts properly.
Free Credit Reports
The U.S. Fair Credit Reporting Act allows consumers to receive one free credit report each year from Equifax, Experian and TransUnion. However, the law doesn't require the companies to give consumers free credit scores each year. Credit scores are separate from credit reports: You may need to pay a fee to get your credit score from a credit-reporting company.
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