How do credit scores work, and why do they vary between different reporting agencies?
In: Economics
Credit score is a measure of how responsibly you’ve managed credit in the past. The precise formula for calculating it is a secret, but the factors that go into it aren’t. It looks at how long they’ve been tracking your history, how many payments have been missed and by how long, how many different types of account they have data for, how much balance you’re carrying on revolving credit, etc. It does not look at income, net worth, or employment history (though a credit application will).
Every month a credit issuer can choose to report activity to some, all, or none of the credit bureaus. Different lenders choose to share data with different bureaus, so the bureaus may have different scores for a person, sometimes quite significantly.
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