Credit scoring and credit pulling often feels like a process that no one talks about the details. You can and should ask questions, though! Two very common misconceptions I hear from clients and others are concerns about different scores from different places and whether you can increase a credit score.

In order to understand how there can be multiple scores, first understand that there are different versions of credit scores. The biggest name is FICO and they calculate your score based on payment history, credit utilization, length of credit history, new credit and credit mix. This is unfortunately why not having any credit lines open can actually hurt your credit score. Each component weighs into an algorithm that spits out a score. One important aspect to note is that there are different formulas or scoring models that each industry needs to use. For example, when you apply for an auto loan they will weigh the components slightly differently than a mortgage company, or a credit card company. Why? Because they are loaning you money based on entirely different terms and for very different types of ‘items’ you are getting in return. They take your past behaviors into consideration based on the risk of what they’re lending.

Once you have reviewed or understood your credit score breakdown, you can then begin to increase or repair your score. Many are able to do this alone with discipline and changing of behaviors. You would need a very good understanding of what has hit your credit and a clear path to fix any issues. Others need help and hire credit repair companies who analyze your score and give you comprehensive steps to bring the score up based on the particular loan you’re trying to get approved. It all starts with understanding how it works and taking the time to review your score.

Don’t feel deflated about the credit rating system! It can seem complex but know that it carries a lot of weight when needing a loan, credit line, mortgage or rental agreement. The hard work put toward creating a healthy credit score can be worth it in the long run.  Decent or high FICO scores can often help with down payment assistance options for a home purchase, better interest rates, and more! Make sure to ask your lender or realtor for their preferred credit repair company.