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A credit reporting agency compiles credit reports and provides that information to prospective lenders and others. Today, there are three main credit reporting agencies in the U.S.: TransUnion®, Equifax®, and Experian®. Though each agency serves a similar purpose, there may be some differences in the type of information found in their credit report.

Let’s take a closer look at credit reporting agencies and the differences between TransUnion and Equifax.

What Is the Role of Credit Reporting Agencies?

Credit reporting agencies, also known as credit bureaus, collect the information necessary to maintain credit reports. All credit reporting agencies manage their own records, which means the information they have about a consumer can differ depending on the information that was reported to them. While the reports may vary, no one credit reporting agency carries more weight than the other.

What Are Credit Scores?

A credit score is a number used by lenders to determine the risk level associated with lending money to a consumer. A borrower’s credit score can influence if a lender decides to work with a borrower and if so, how much credit, what terms, and how high of an interest rate they end up getting.

Credit scores are based on a consumer’s credit report. Everyone has more than one credit score as these scores are calculated by the three main credit reporting agencies.

Some lenders use internal scoring models as well, but generally, it’s more common for lenders to use one of the three main agencies’ reports to inform their lending decisions.

Recommended: Which Credit Bureau Is Used Most?

What Are Credit Reports?

A credit report details information about a consumer’s financial life, such as:

•   Payment history

•   Outstanding balances

•   Length of credit history

•   Applications for new credit accounts

•   Types of credit accounts (such as mortgages or credit cards)

Credit reports from each of the three major credit bureaus can be accessed weekly free of charge via AnnualCreditReport.com.

Need help keeping tabs on your finances year-round? Consider using a spending tracker, which can be useful when it comes to making progress toward short- and long-term financial goals.

Recommended: What Is Considered a Bad Credit Score?

How Does Equifax Calculate Credit Scores?

An Equifax credit score isn’t used by lenders or creditors to assess a consumers’ creditworthiness. Instead, many lenders use FICO Scores® to help determine a potential borrower’s creditworthiness. FICO uses credit scores from the three reporting agencies, including Equifax and TransUnion, to determine their score. Equifax recommends aiming for a score of 739 or higher if a “good” score is desired.

The Equifax credit score model falls on a credit rating scale that starts at 280 and ends at 850. The higher a score is on this scale, the better indication that the consumer poses a lower risk to creditors.

TransUnion and Equifax calculate credit scores differently. An Equifax credit score is an educational credit score. The point of this credit score is to provide consumers with the knowledge to help them predict their general credit position.

How Does TransUnion Calculate Credit Scores?

When it comes to TransUnion credit scores, this agency uses an outside model, the VantageScore® 3.0 model. The VantageScore scoring model ranges between 300 and 850 points. According to TransUnion, a “good” credit score to have on the TransUnion and VantageScore 3.0 model is between 661 and 780. VantageScores are an alternative to FICO Scores that are used by some lenders to inform their lending decisions.

What They Offer

Alongside credit scoring and credit reports, both of these credit agencies have unique offerings to help consumers understand their credit better and to provide protection against fraud.

TransUnion Offerings

TransUnion members ($29.95 per month) gain access to:

•   Unlimited access to credit score and reports that are updated daily

•   Recommendations to help improve credit score

•   Their product, Credit Lock Plus, which allows individuals to lock their TransUnion & Equifax reports

•   Up to $1 million in identity theft insurance

Equifax Offerings

Signing up for Equifax Complete ($9.95 per month) gives members access to:

•   Equifax credit report monitoring

•   Daily access to VantageScore credit score and Equifax credit report

•   Dedicated ID restoration specialists to help members recover from identity theft

•   Up to $500,000 in identity theft insurance

TransUnion vs Equifax: Which Is Most Accurate?

So, which credit report is most accurate? When it comes to accuracy, all three credit reporting agencies are responsible for ensuring that credit reports are accurate. No one agency is more accurate than the other. That being said, mistakes can happen.

Consumers may want to keep a close eye on their credit report to make sure that mistakes haven’t occurred — especially as these mistakes can negatively impact credit scores. To report errors found on a credit report, consumers can follow this process:

1.    After finding errors on a credit report, write a letter that disputes these errors and include any supporting documentation that can strengthen the case against the error. You can find a sample letter here .

2.    Send the letter and documentation to the credit reporting agency and the information provider (like a bank or credit card company) that reported the inaccurate information to the credit reporting agency in question. Both the credit reporting agency and the information provider will be responsible for fixing credit report inaccuracies or incomplete information.

3.    If the written dispute does not result in the mistake being resolved, the next step would be to file a complaint with the Consumer Financial Protection Bureau.

TransUnion Disputes

TransUnion disputes can be filed on their website or by mail. After the documentation has been received, it can take up to 30 days to resolve the dispute.

Try to include as much of the following information as possible in the communication:

•   Name

•   Partial account number of the disputed item (from credit report)

•   Current address

•   TransUnion file number (if applicable)

•   Social Security number

•   Date of birth

•   Name of the company that reported the item that needs disputing

•   Reason for the dispute

•   Any corrections to personal information that needs to be made

Disputes can also be made by phone.

Equifax Disputes

Equifax disputes can be made online, by phone, or by mail. Consumers will generally want to provide as much of the following information and documentation as possible or applicable:

•   Valid driver’s license

•   Birth certificate

•   Copy of a utility bill

•   Current bank statements with account information

•   Letters from a lender showing the account in question has been corrected

•   Proof that an account error was the result of identity theft

•   Bankruptcy schedules and other court documents

•   Student loan disability letters

•   Canceled checks

Results are generally completed within 30 days.

No matter which agency you use, it helps to have a holistic view of your finances. Using a money tracker app is one way to help you manage your spending and saving.

Recommended: What Credit Score Is Needed to Buy a Car?

The Takeaway

TransUnion and Equifax are two of the major credit bureaus in the U.S. They collect information about a consumer’s financial life, such as their payment history, applications for new credit, and existing credit. This information is recorded in the form of a credit report. Based on information in the credit report, each bureau determines credit scores based on their own scoring model. However, TransUnion and Equifax calculate credit scores differently, and both have unique offerings that help consumers better understand their credit and protect themselves in the event of fraud.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q225-002

Credit matters when looking to buy a house, car, or any other pricey asset. Unless a consumer is flush with cash, the path to home and vehicle ownership may go through a mortgage or a loan. Good credit can provide you with terms and privileges not available to a person with poor credit, including lower interest rates and increased borrowing capacity.

We delve into what constitutes a good credit score and the reasons why it is important to have a good credit score.

What’s Considered Good Credit?

Consumers with standard credit scores of 661 or greater are generally considered to have good credit, because they rank as prime or super prime in terms of their risk assessment. A bad credit score falls on the lower end of the range, and a good credit score falls on the higher end of the range.

Many credit scoring models, including the standard FICO® Score and VantageScore®, measure an individual’s credit risk on a three-digit scale ranging from 300 to 850. The highest risk group are consumers with deep subprime credit scores from 300 to 500, and the lowest risk group are consumers with super prime credit scores from 781 to 850, according to Experian.

Consumers may build and attain good credit by paying their bills on time, maintaining a mix of accounts, and keeping their revolving balances under 30% of credit limits.

Recommended: What Is the Difference Between TransUnion and Equifax?

8 Benefits of Good Credit

Here are the eight core benefits of good credit, which highlight why it is important to have a good credit score:

Benefit #1: Easier Access to Credit

Good credit may provide you with easier access to additional credit. When a consumer applies for a credit card or personal loan, lenders may analyze the consumer’s credit report and credit score to make an informed decision on whether to approve or deny the application. A person with good credit is considered low-risk and therefore has an easier time getting approved for a personal loan compared to high-risk borrowers.

SoFi’s money tracker app allows you to monitor and keep track of your credit score, among other perks that could assist with financial planning and managing your net worth.

Benefit #2: Lower Interest Rates

Consumers with good credit may qualify for lower interest rates when borrowing money. For example, available financing data for new vehicle purchases in the fourth quarter of 2024 show consumers in the deep subprime category of bad credit have obtained auto loans with 15.75% interest on average. Meanwhile, consumers in the super prime category of excellent credit secured 4.77% interest rates on average. That amounts to a nearly 11 percentage point difference in interest rates.

Benefit #3: Lower Car Insurance Premiums

Many auto insurance companies use credit-based insurance scores to help categorize consumers by risk and determine what premiums they may pay. Under this practice, higher-risk consumers may pay higher auto insurance premiums than lower-risk consumers. In some states, having good credit or improving your credit score may lead to lower auto insurance premiums over time.

Benefit #4: Increased Borrowing Capacity

Consumers with good credit may obtain larger credit limits than those with poor credit. This could translate to greater spending power on a credit card and the ability to make larger purchases on credit. Having good credit also puts you in a better position to apply for and obtain new credit.

A bolstered borrowing capacity is not limited to credit cards either — credit unions and banks may offer personal loans to consumers with good credit. Such loans can help you consolidate debt, finance large purchases or obtain fast cash to weather an unforeseen emergency. Personal loans also may command lower interest rates than credit cards.

Benefit #5: Easier to Buy a Home or Car

Good credit can help you buy a house with a good mortgage rate or a car with affordable financing. Borrowing money to own a home or vehicle comes at a price that includes principal and interest. Consumers with good credit may qualify for 0% annual percentage rate loans for a car, where no APR means no interest or finance charges. Establishing good credit may also improve your likelihood of obtaining a low-APR mortgage, which translates to lower debt repayment obligations.

Automotive consumers had an average credit score of 749 for new vehicle purchases and 687 for used vehicle purchases in the fourth quarter of 2024, according to Experian’s quarterly report. This shows the average automotive consumer boasted good credit within the prime category of low risk.

Recommended: What Credit Score Is Needed to Buy a Car?

Benefit #6: More Apartment Lease Options

Signing a lease to an apartment may require good credit. Landlords who conduct credit checks might deny lease applications if a prospective tenant has bad credit. Or, those with poor credit may have to provide a higher security deposit for rental housing compared with a prospective tenant who boasts good credit. Tenants with good credit also may have more leverage to negotiate for lower rent.

Benefit #7: Helps Satisfy Employment Background Checks

Jobseekers can benefit from good credit, as some employers may consider a person’s credit score when making hiring decisions. The U.S. Department of Housing and Urban Development says that a low credit score or credit invisibility is a burden that can “limit housing choice and employment opportunity,” whereas “a good credit score is part of the pathway to self-sufficiency and economic opportunity.” The term “credit invisible” refers to consumers who lack a credit score or credit history.

Benefit #8: Ability to Obtain Security Clearances

Law enforcement officers with good credit could gain privileged access to classified national security information and FBI facilities. Any state or local law enforcement officer seeking a security clearance has to first satisfy a comprehensive background check that includes a review of credit history. The FBI shares secret or top secret information with local law enforcement officers who have obtained security clearances.

Poor credit history would not necessarily disqualify an officer from obtaining a security clearance, but significant credit history issues “may prevent a clearance from being approved,” according to information posted on the FBI’s website.

The Takeaway

Good credit is important for anyone who wishes to borrow money to help finance key purchases. Many consumers rely upon mortgages and loans to buy houses and cars, while many cash-strapped individuals turn to credit cards to buy essential goods and services ranging from food and electricity to water and rent for housing. The eight benefits of good credit highlighted above showcase why it is critical to pay your bills on time and practice good budgeting.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

Photo credit: iStock/AndreyPopov

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q225-007

A lot of basic “adulting” involves a credit score. Renting an apartment? The landlord will want a credit score. Financing a car? Lenders need to see a credit score. Buying a home? You get the point.

A low or nonexistent score can get in the way of your life plans. But a few simple steps can set you on the path to success.

How Many Credit Cards Do You Need?

Don’t own a credit card yet? Getting a card is a simple way to start establishing credit. (People who already have a card with a balance might want to focus on paying it off instead of applying for a new one, though.) However, it’s crucial to use a card wisely. Otherwise, cards can do more harm than good.

Most people should consider applying for just one card, not five. And keep in mind that just because someone has a card doesn’t mean they have free money. Opening one new line of credit and using it responsibly is a good way to build credit.

Recommended: Does Applying for Credit Cards Hurt Your Credit Score?

How Credit Cards Impact Your Credit Score

While some people out there believe credit cards are the root of all evil, they can boost credit scores in multiple ways if used correctly. The most common credit score model is issued by FICO®. Your FICO Score is comprised of five factors:

•   Payment history: 35%

•   Amount owed: 30%

•   Length of credit history: 15%

•   Credit mix: 10%

•   New credit: 10%

Credit cards can be an effective tool in a new credit builder’s toolbox. When someone uses a credit card responsibly, this can potentially have a positive effect on all five FICO categories.

Payment history: Making monthly payments on time (even just minimum payments) can help your credit score. As you make consecutive monthly payments, your score should gradually increase — as long as you remain responsible with your finances in other areas of your lives.

Amount owed: Everyone has something called a credit utilization ratio, sometimes referred to as a debt-to-credit ratio. This is the ratio of debt you owe versus how much debt you can owe.

Credit cards have credit limits. Let’s say Dana’s credit limit is $10,000, and she owes $5,000 on her card. Her credit utilization ratio is 50%. If she pays off $1,000 and only owes $4,000, her ratio is 40%. The lower the ratio, the better. That’s why older adults often lecture teens and early 20-somethings to pay off their card balances in full. A low ratio means better things for borrowers’ credit scores.

Length of credit history: The longer you have a line of credit, the better it is for your score. Ideally, someone would open their first credit card and keep it for years while making payments on time and keeping their balance low.

Those who already have a credit card but have racked up debt may want to think twice before canceling their card for this very reason. They might be better off working to pay off the balance aggressively and keeping the card for longer. But if they want to remove the temptation to keep charging the card, they can cut up the credit card, like Rachel does in Friends. This way, the card isn’t sitting in their wallet, but their line of credit is still open.

Credit mix: FICO likes it when people have multiple types of debt. A recent college graduate’s only debt might be student loans. To improve their credit mix, they might consider getting a credit card as well.

New credit: When someone applies for a card, the issuer checks their credit score to determine whether they’ll be approved and what the interest rate should be. This is known as a hard credit inquiry.

A bunch of hard credit inquiries in a short amount of time looks bad for a credit score, especially for someone whose score is already low. Besides, by limiting themselves to only one card, young people who are still learning the ropes of establishing credit might be less inclined to spend recklessly.

Recommended: What Is the Average Credit Card Limit?

Consider a Secured Credit Card

Young people with low credit scores (or even no scores at all) may not be accepted if they apply for a top-notch credit card. Another option is to apply for a secured credit card. This type of card is meant specifically for people who want to build credit.

To use a secured credit card, people make a cash deposit to back their credit card account. The deposit amount typically becomes their spending limit. For example, John makes a $100 deposit when he receives his secured credit card. He can charge up to $100 to his card before paying it off. As long as he makes payments, he can keep charging to the card as long as the balance doesn’t exceed $100. If John doesn’t make payments on time, the issuer can take money from his cash deposit.

Secured cards benefit both the consumer and issuer. The consumer can build credit, and a cash deposit makes it less risky for the issuer to do business with someone who hasn’t yet proven that they can make payments on time.

What happens to that cash deposit down the road? If all goes well, people should get back their money. Many reputable credit card issuers offering secured credit cards give consumers the option to upgrade to a regular “unsecured” credit card once their credit score improves. When the user upgrades, they should receive that deposit back.

People researching secured credit cards may want to look for issuers who will let them transition to an unsecured card. This can simplify the process of switching to a regular credit card. Plus, the borrower won’t have to hang onto an unnecessary card or cancel the secured card later — which can help the “length of credit history” part of their FICO score!

Become an Authorized User on a Parent’s Credit Card

Some people may not trust themselves to use a credit card without racking up a ton of debt. Or they have the exact opposite fear: They might never use it, so they wouldn’t be making payments to boost their payment history. The latter fear may be the case for young people who are still receiving financial help from their parents and therefore don’t have many expenses to put on a card.

In either of these cases, young people might consider becoming an authorized user on a parent’s credit card. The parent can call the credit card issuer to officially put their child’s name on the card.

Young people should only add their name to a parent’s card if the parent has a high credit score and solid financial habits. If the parent starts to miss payments or accumulate a ton of debt, it will negatively affect the authorized user’s credit score.

Establishing credit through a parent’s card can help someone acquire a decent score before getting their own credit card. If they have a good credit score prior to applying for their first card, they might be approved for a harder-to-get card at an attractive interest rate. After receiving their own card, they might decide to remove their name from the parent’s card so they can have sole control over their personal credit score.

Pay Bills on Time

We’ve established that making monthly credit card payments positively contributes to the “payment history” part of a credit score. Credit cards aren’t the only things people can pay on time, though. Making timely payments on things like car loans or student loans also helps.

Certain bills don’t show up on credit reports, such as cell phone bills and insurance payments. While paying those bills doesn’t improve people’s credit scores, skipping payments can certainly hurt their scores. When people default on their payments, their credit scores can take a major hit. So it’s important for people to pay all their bills, even the ones that aren’t on their credit reports.

Take Out a Credit-Builder Loan

Just as secured credit cards exist for people trying to build credit, there are special loans for this purpose as well. These are called credit-builder loans, and they are usually offered by smaller banks and credit unions.

When people take out credit-builder loans, the loan amount is held in a separate bank account until the borrower pays off the full amount. By making payments on time, the “payment history” part of people’s scores should gradually improve. Borrowers do have to pay interest on the loan, and the percentage will depend on the lender. But there’s a huge bonus: Once people pay off the loan, they get to pocket the full loan amount and the interest they’ve paid. Not only do they walk away with a better credit score, but they now have money to put toward their emergency fund or student loan payments.

While people don’t need a good score to be approved for a credit-builder loan, they do need proof that they earn enough money to make monthly payments on time. They may need to provide documents such as bank statements, employment information, housing payments, and more.

Considering taking out a credit-builder loan? When shopping around, it is a good idea to keep an eye out for factors like APR, required documents, term length, loan amount, and additional fees before making a decision.

Keep Track of Your Credit Score

Many people have no idea what their credit score is. By regularly checking their score, they can know exactly where they stand and how much progress they need to make to reach their goals.

Some people may be concerned that checking their credit score can lower their score. But don’t worry, only “hard inquiries” affect credit scores. Hard inquiries occur when issuers or lenders check borrowers’ scores to determine whether to approve them for a credit card or auto loan, for example. But when a person checks their own score on a website or money tracker app, this is considered a “soft inquiry” and doesn’t affect their score.

The Takeaway

When establishing credit, keep in mind that “slow and steady wins the race.” People shouldn’t get discouraged when their credit score doesn’t surge after two months of making payments on time. And if they do get discouraged, they shouldn’t give up. The important thing is to continue making payments on time and using a card responsibly. The reward will come.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q225-013

Taking a break from financial obligations can offer some breathing room, but it’s important to understand how deferred payments may affect your credit score.