Summary: What is Equifax? Understanding that question is part of being an educated consumer. Learn what Equifax is and how to check your Equifax score so you can learn how to improve it.
Credit score terminology can get confusing.
For such a simple idea – quantifying a borrower’s creditworthiness with a number – it’s amazing how many terms, companies, and concepts a consumer needs to know just to grasp the basics.
So when it comes to names like Equifax, TransUnion, Experian, FICO, and VantageScore, how can the average consumer keep it all straight? How do these terms relate to each other, and how do they influence a credit score?
Let’s start by taking one of these terms – Equifax – and breaking down what you need to know.
What is Equifax?
Equifax is a credit bureau, or a company that compiles information about individual consumer lending habits to create a credit report. Equifax is the oldest credit bureau and began in 1899 as the Retail Credit Company.
There are two other major credit bureaus, Experian and TransUnion. When you check your credit report, it will always be from one of the three credit bureaus.
Lenders, banks, and credit card companies report account activity to credit bureaus like Equifax. If you’re evicted or default on a medical bill, your landlord or doctor’s office may report that information to Equifax and the other credit bureaus.
Companies are not legally required to report information to all three credit bureaus, which explains the discrepancies between one credit report and another.
🤔 Did you know that 90% of lenders use FICO credit scores for underwriting decisions?
When you apply for a new loan, credit card, or other lines of credit, the lender or credit card provider will look up your credit report. They may view reports from all three credit bureaus or just one or two. If you’re applying for a major loan like a mortgage, the lender will pull credit reports from all three.
When it comes to TransUnion vs. Equifax, some consumers assume TransUnion is more reputable because of the 2017 Equifax hack. In reality, both companies have experienced data breaches in recent years.
In 2019, TransUnion announced that a hack could have affected about 37,000 Canadian consumers. This is much smaller than the Equifax hack, which affected 147 million people. In general, all three credit bureaus collect similar information about your habits and are long-standing companies.
How to Check Your Equifax Credit Score
Consumers who want to check Equifax scores have two options. They can either view their Equifax FICO score or their Equifax VantageScore. FICO and VantageScore are the two main credit score models that lenders use when approving an applicant.
FICO is more widespread, with over 90% of banks, credit card servicers, and loan companies relying on FICO credit scores. Free credit score sites usually rely on VantageScore. There are other credit score models, but they’re rarely used.
You can check your Equifax FICO score through MyFICO, which shows all 28 FICO credit scores. There are different credit score models for various lenders, such as mortgage lenders, auto lenders, and credit card companies. That’s why you’re likely to see multiple Equifax FICO scores.
Ways to Boost Your Equifax Score
Your Equifax credit score is important. It can affect the interest rate you receive on your mortgage, the credit cards you qualify for, and even whether or not you can sign a lease without a cosigner.
Understanding FICO Scores
Did you know lenders pull different FICO scores when you apply for a car loan vs a home loan? And yet another for credit cards? And the scores can vary (a LOT!)
👉 Learn all about the 30+ different credit scores you have.
An Equifax boost can improve your chances of getting a better deal on a mortgage or auto loan.
Track Your Credit Score
First, check what type of credit score you have through the MyFICO site, which shows all 28 variations of the FICO credit score.
If you sign up for regular monitoring, you’ll receive an updated score once a month.
Seeing your latest credit score will help keep you on the right track.
Make Payments on Time
On-time payment history accounts for 35% of your FICO credit score. Your score will increase if you pay your bills on time, but missing even one payment could cause a significant dip.
Find a way to ensure you never miss a payment. Even if you have autopay or bill pay set up, always monitor your loans and credit cards to verify that a payment went through.
Lower Your Credit Card Utilization
If you have credit cards, check that your utilization percentage is lower than 30%. This percentage is calculated by dividing the current balance by the original credit limit.
If your current balance is $300 and the credit limit is $1,500, your utilization percentage is 20%.
Credit card companies don’t monitor this ratio, so you’ll have to do the math yourself.
🧮️ Use our credit utilization ratio calculator to find yours…
Keep Old Accounts Open
The average age of your credit history makes up 10% of your FICO score.
Every time you close an old account, you risk lowering the average age.
Keep credit cards open as long as possible and avoid closing any credit cards unless there’s a steep annual fee.
Become an Authorized User
It can take longer to build a credit history when you’re starting with nothing.
Much like applying for an entry-level job that requires experience, it’s hard to be approved for a line of credit when you’ve never had one before.
Lenders are hesitant to give money to someone with no track record.
Becoming an authorized user on someone else’s credit card is one of the best ways to build your credit history quickly. If you have parents with stellar credit scores, ask them to add you as an authorized user on their oldest credit card.
When you become an authorized user, the history for that card is then added to your credit report. This helps you apply and get approved for your own credit products.
Get a Credit Builder Loan
Unlike regular lending products, credit builder loans are solely designed to help consumers improve their credit. Here’s how they work.
The consumer in question applies for a credit builder loan from a reputable company like Self, which does not conduct a credit check. The individual starts making regular monthly payments to Self, which keeps the payments in a secure account.
After the loan term is over, the consumer receives their money back, minus some fees. By this point, they should have a solid credit score.
Know Your Credit
These basic steps will improve your credit score at all three credit bureaus. To know the differences between your scores at the three bureaus, you’ll need to get your credit reports.
You are entitled to a free credit report from each credit bureau every year. Many consumers get one every four months, to monitor all three.
Learn to read and understand your credit reports, and you’ll have a better understanding of what Equifax does and what Experian and TransUnion do! You’ll also have a better understanding of your own finances, and that will help you improve your financial future!