The Motley Fool: How do you explain that credit score?

When you’re gearing up to borrow money and you dig up your credit scores, don’t be surprised if you get several wildly different numbers. This matters, because you don’t know which score a lender is going to use.

The main credit reporting agencies (Equifax, Experian and TransUnion) use different scoring systems. When you hear of your “FICO” score, that refers to the score developed by Fair Isaac Corp. and used by most lenders. It’s available via www.equifax.com and Fair Isaac’s site, www.myFICO.com. TransUnion ( www.truecredit.com) and Experian ( www.freecreditreport.com) each do a different calculation, with scoring ranges different from Fair Isaac’s 300 to 850. Some lenders look at only one of the three bureaus, some look at all three and take the average, some look at all three and take the best — and some take the worst!

One reason for big differences is that the agencies don’t collect all of the same information. Some lenders may report your credit activity to one agency, but not another. There may also be a serious error on one agency’s report, affecting its score. Fixing the error might help your score.

Also relevant is when in the credit cycle your score is calculated. Lenders typically report to the credit bureaus the last amount you were billed as your “current balance.” If your reported credit card balance is very low, then your “debt to available credit” ratio is going to be low, too, thus helping your score. But if you have a large balance, your score can take a hit.

You can check all three FICO scores and credit reports in one fell swoop at myFICO.com. For a short time, Fool readers can get the FICO deluxe product at a 15 percent discount — get details at www.myFICO.com/FoolScores.

You can (and should!) learn much more about the credit-reporting process, as it can affect many aspects of your life. Poor scores can cost you thousands of dollars wasted in inflated interest rates on home and car loans and more. Learn how to fix errors on your report at www.fool.com/ccc.

Ask the Fool

Q: Can I lose all of my money in a mutual fund? I’m down about 50 percent in one fund. — T.B., Reading, Pa.

A: While some stocks can and do fall to zero, mutual funds rarely do, since they contain many different holdings. (Know, though, that with stocks, if you’ve been keeping up with your companies’ financial reports and news coverage, you’ll likely spot red flags long before a company goes out of business.)

Meanwhile, if you don’t expect your fund to perform well in the future, you should sell, taking the loss. Why leave money there, either stagnant or falling in value, when it could be growing elsewhere?

My dumbest investment

Like father, like son. In 1958 my dad sold $2,000 worth of stock in the Haloid Co., so he could buy one-half of a Detroit two-family house. Shortly thereafter, Haloid changed its name to Xerox and became one of the best-performing stocks of the 1960s, gaining more than 5,000 percent in that decade. (The duplex has long since been torn down.) I, in turn, have sold stakes in SanDisk and Chico’s way too early, thus missing out on a couple of 10-baggers. — Paul Szydlowski, Cincinnati

The Fool Responds: Selling too soon is a common investing mistake. You might be happy with a doubling of your investment, but if the company is performing well, is maintaining its competitive advantages, doesn’t appear wildly overvalued and still has strong growth prospects, hanging on for the long haul could eventually triple your money, or more.