The push for free credit reporting agencies online has turned into a million-dollar advertising industry, with catchy jingles and fun commercials airing on cable networks across the U.S. Marketing aside, though, the importance of this score may be lost on individuals who don't understand what it means. Higher may be better, but a mediocre score isn't the worst thing in the world, and low scores can be recovered over time. In fact, not everything on your reports may be true.
The three source system
If you've talked to a financial adviser or other individual in the industry, or really if you've every applied for a loan or line of credit, you know that institutions check your credit history. Some employers even follow this practice to see if potential employees are toting around long-standing debts or have a track record of proven financial difficulty.
The reports they reference are issued by three agencies, according to The Financing Corporation (FICO), consisting of Equifax, Expirian and TransUnion. Other credit bureaus exist inside the U.S., but these three are the top trusted entities among banks and other businesses.
However, your score can be different with all three agencies, as FICO points out. That's because not every update is automatically broadcast to all these entities. If you've ever been in collections or resolved an outstanding account, the primary holder of that debt is not always obligated to notify anyone in writing but you. It's then your responsibility to maintain these documents and send them to agencies yourself if they persist on credit checks.
What these can do
Your credit score can get you a job, a loan, a phone service or help you open an account with a bank. US News wrote that they can also help you determine if your personal information has been compromised, a growing trend in the Internet age where more of your vital data is within reach of hackers and other malicious entities.
Reviewing your credit score annually can help you stay in good standing, catch problems as they come up and help you get the upper hand if you need to contend anything you feel is inaccurate on your profile. Making sure all three institutions match should be on your regular credit check-up schedule, as credit scoring will always have some affect on your life, despite age or other factors.