9 Surprising Facts About Your Credit Score

Checking your score doesn't hurt it, but maxing out your credit cards does.

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A solid credit history and excellent FICO credit score – typically 750 or above -- are extremely valuable. A high credit score can save you tens of thousands of dollars in mortgage interest, lower your auto insurance premiums, and even help you land your next job. For all their importance, however, a lot of confusion surrounds credit reports and scores. To take some of the mystery out of these important financial tools, here are 9 facts about credit reports and scores that might surprise you.

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1. There are three major credit bureaus, not just one: Equifax, TransUnion and Experian each track information about how consumers use credit. Based on that information, each credit bureau also maintains FICO credit scores for each consumer in its database. As a result, you have three credit reports and multiple credit scores. And because each credit bureau typically has slightly different information about your credit history, the FICO credit score generated from each of the credit bureaus also tends to vary, sometimes significantly.

2. Not everybody has a credit history: If you’ve never applied for or used credit, you won’t have a credit history maintained by the three credit bureaus. Without a credit history, you also won’t have a FICO credit score.

3. Credit reports and scores are different: While your FICO credit score is generated based on information in your credit report, it’s important to understand the difference between the two. Your credit report shows your history of using credit, including the accounts you have (both opened and closed), your payment history, credit limits, and amounts owed. Your FICO credit score is generated based on this information, and generally ranges from a low of 300 to a high of 850.

4. What’s free and what’s not: This is probably the most confusing aspect of credit reports and scores. Under the Fair and Accurate Credit Transactions Act (the FACT Act), you can get a free copy of your credit report once each year from each of the three major credit bureaus by going to annualcreditreport.com (not, by the way, freecreditreport.com). What many don’t realize, however, is that the free copy of your reports does not include your FICO credit score. To get your FICO credit score for free, you generally have to sign up for a free trial of credit monitoring service offered by a number of providers. Cancel the service before the free trial expires, and you pay nothing. Continue the service past the free trial’s expiration date, however, and the cost is typically about $15 a month until you cancel.

5. Credit scores affect more than credit: When it comes to the importance of having good credit, many people think of qualifying for a home mortgage, car loan, or credit card. But the fact is good credit affects a lot more than applying for a loan. For example, your credit history will affect how much you pay for auto insurance. Many employers now pull credit reports on potential employees. And landlords will likely check your credit before approving a rental application.

6. Not all credit scores are FICO scores: The FICO credit score is not the only credit scoring formula available. Each of the three major credit bureaus, for example, has developed their own scoring models. And there are even multiple FICO score calculations. The key is that if you want access to your FICO credit score, make sure the service you use will provide your FICO score, and not a credit score based on some other formula.

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7. Getting your report does not hurt your score: You can check your own credit report and score without affecting your FICO credit score. While inquiries by creditors with whom you have applied for credit can lower your score, checking your own score will have no affect on your credit file.

8. Maxing out credit cards does hurt your score: While it’s important to pay your bills on time and not to exceed your credit limit, maxing out your credit cards can lower your score, too. In fact, according to data recently released by the company behind the FICO score, maxing out a credit card can lower your FICO credit score by 10 to 45 points

9. You can always improve your score: Even if you’ve filed for bankruptcy or gone through a foreclosure, you can still improve your credit. Negative references do not remain on your credit report forever, and there are many ways to improve your credit score.

DR is the founder of the popular personal finance blog, the Dough Roller, and author of 99 Painless Ways to Save Money.