I have the opportunity to speak to many consumers about how credit reports and credit scores work. I often hear many of these consumers complain about how their credit scores are not correct. How can a credit score by incorrect?
Many people fail to understand credit reports and credit scores are not the same. First, you have to understand some of the basics.
A simple way to think of a credit report is it is a combination of all your current and past credit accounts. These credit accounts, also known as data, includes who your creditors are, how much you owe, the account open dates, and how timely payments were made on the account to name a few. I can go on but I want to keep this simple.
A credit score is a numeric score derived from the data reported on your credit report. Keep in mind, a score is generated from the data contained in your credit report at a point in time. Since the data related to a credit report constantly changes, so too does your credit score. Credit scores are meant to predict a future event. Many types of credit scores exist and most lending decisions are based on a FICO Score or a Vantage Score. Keeping this simple, the credit scores most consumers know about are meant to predict if a consumer will pay a bill on time in the future.
Not all credit reports include credit scores. Depending on how a credit report is obtained, it may or may not include a credit score. A credit score, however, cannot be calculated without obtaining a credit report. Without a credit report, there is no data to score.
A credit score in itself cannot be inaccurate. After all, the credit score is based on the credit reporting data at the time the credit is pulled. A credit score does not validate the data for accuracy. The best way to think about this is if something is reported on your credit, it is included in your score. If your credit report includes inaccurate data, good or bad, this inaccurate data gets scored.
If you think your credit score is inaccurate, I suggest the first step is to look at the data on your credit report to see if it contains errors. If your credit report contains errors, work on getting them fixed and your score will only score accurate data in the future.