It’s bad enough to worry about ONE credit score.
There’s a three digit number that matters greatly to your financial well-being. This number can make or break a big financial decision, or be the reason for hefty deposits. If you haven’t figured it out by now, we’re talking about your credit score.
First of all, your credit scores being different is no cause for panic. While most of the credit scoring agencies report different numbers, most of them contain the same common details regarding your credit history. So, if they all contain the same basic information, why do they have differing scores?
The simple answer to this question is, because they are different organizations. Each has their own algorithms, scoring factors, etc. that determines your overall score.
One of the famous and reliable credit scoring company FICO keeps track of all your credit activities. FICO Scores depend on the data listed by your lenders on the credit reports. FICO has expanded to offer 28 unique scores that are optimized for various credit cards, mortgages and auto lending decisions. Achieving a high FICO score requires having a combination of credit accounts and maintaining a neat and clean payment history.
Major credit-bureaus in the US.
There are three other major credit-reporting agencies – Equifax®, Experian®, and TransUnion®. While each of these credit-reporting agencies takes different criteria into account to calculate your credit scores differently, the common thing about them is that they all focus on how responsible you are with the money you borrow. Sounds good, right? Not for everyone.
Equifax offers numerical credit scores that range from 280 to 850. However, if their Equifax report is much stronger than their Experian report or FICO score, then they have the ability to search for lenders that prioritize Equifax. They all compete to capture, update and store credit histories on most U.S. consumers.
Nevertheless, there is only a little difference in the information they collect from the consumers for calculation of the credit scores. But, a bureau getting some unique information might lead to the calculation of a different score from the other two.
Why are your credit scores different?
What causes variance in credit score and report across credit reporting agencies? There’s are a few reasons why you might get different credit scores from FICO and each of the three major credit-reporting agencies. Here are some of the most common criteria which influence your three-digit numbers:
- Scores may be from different dates.
- Since your scores may change at any time, it’s vital that you compare your credit scores from the same date.
- Scores are calculated using unique credit bureau algorithms.
Keep in mind, there are dozens of credit scoring models out there that may calculate your score a little differently. Do not panic. It’s just their own way and decision as to which factors they take into account for calculating your credit score.
Scores are calculated using different credit reports.
Some lenders report to all three major credit agencies, but some others might report to only one or two and not to all. This means that a credit agency may not be having information that helps or hurts your score. This missing detail might lead to your different credit scores by different credit models.
It can prove really difficult to keep track of all your credit scores because there are so many on the list, and that too when each score changes over a certain period of time.
With a multitude of scoring models, how do we determine which score a specific lender will use?
According to Fair Isaac, 90% of reputed U.S. lenders use FICO scores. While that helps narrow the field, remember that Fair Isaac has introduced more than 60 FICO scores since 2011. Following FICO scores are used for availing different credits.
- Financing a new car: FICO® Auto Scores, the industry-specific scores used in the majority of auto financing-related credit evaluations.
- Getting a new credit card: FICO® Bankcard Scores or FICO® Score 8, the score versions used by many credit card issuers.
- Getting a mortgage: Base FICO® Score versions previous to FICO® Score 8, as these are the scores used in the majority of mortgage-related credit evaluations.
These complicated facets of credit scores results in varying scores between the bureaus. Thanks to consumer resources like Credit Karma, you can stay up to date on your score and health in real time. Remember, while your score will likely be different between the bureaus, it shouldn’t be wrong on any of them. If you find a discrepancy, dispute it right away with the bureau in question.