Credit score is the rating that you get for your performance in using your credit. Just like in school, how you perform and how you use your resources will be reflected on your final grade. Your credit score is like your final grade, and using your credit card is your test. If you do not pass the test, which is if you do not pay your debts on time, your score will be very low. And just like in school, if your credit score is low, there are a lot of privileges and opportunities that you will not be able to avail.
Individuals who have bad credit scores can still avail different credit forms like loans, credit cards, and cash advances. But the difference between these low score individuals and high score ones is that low score individuals are charged with higher interest rates, thereby increasing their debts if they are not able to pay their dues on time. This can make it very hard for a credit holder to settle all of his dues, and it may even lead to various other complications like bankruptcy, lawsuits, and bad credit reputation.
In order to be able to manage your finances better, it’s good to always get hold of your credit score. But some people get confused with all of these financial terminologies and concepts. One of the things that you may be asking about is the beacon score. What is a beacon score? The truth is it’s also credit score, but it has been named so in order to identify the score that you get as a score which has been generated by one of the three major credit bureaus, which is Equifax. Similarly, you can get credit scores from the other two credit bureaus, TransUnion and Experian, and these scores also have their specific names: Empirica, and FICO or FICO II, respectively.
Why are the credit score names different for each credit bureau? Why can’t you just call it credit score? There’s really no problem in calling credit score in its general term, but these three credit bureaus use these specific names for their credit scores in order to distinguish them from one another. Since these credit bureaus operate independently from one another, they can have very different credit scores to show for a single individual. But this is not because of their different formulas used in calculating the credit score. In fact, all credit scores are calculated according to a single algorithm, and this algorithm was created by FICO or the Fair Isaac Corporation, a credit company that is completely independent from these credit bureaus.
All three bureaus, Equifax, Experian, and TransUnion, make use of the algorithm generated by FICO to calculate the scores of all credit holders. But the differences in scores among these bureaus are caused by their different affiliations with various banks. Not all banks are affiliated with these three credit bureaus completely. For instance, one bank may be affiliated with Experian and Equifax, but it may not be affiliated with TransUnion. Therefore, all of the credit users in that bank have records in the first two credit bureaus, but they have no records in the third bureau. If you have a lot of banks enrolled in, your scores from every credit bureau may vary because of your banks’ relation with these bureaus. To get your complete and accurate score, you can get a copy of your credit score from all three bureaus and get the average of these three scores. Whether it’s a Beacon score, a FICO or FICO II score, or an Empirica score, the actual number of your score is really what matters most.