Ever wondered why your credit scores differ across different websites? It’s not just your imagination – there are actually several reasons why this happens. In this comprehensive guide, we’ll delve into the world of credit bureaus, uncovering their secrets and helping you understand which one matters most for your financial future.
But first, let’s address the elephant in the room:
Why are my credit scores different?
This is a common question and the answer lies in the intricate world of credit scoring models and the three major credit bureaus: Equifax Experian, and TransUnion. Each bureau gathers information from various sources, including credit card issuers, banks, and public records, to generate your credit report. However, they may not always receive the same information, leading to discrepancies in your scores.
But wait. there’s more!
Credit scoring models also play a role:
- FICO® Score: This is the most widely used model, accounting for 90% of lending decisions. It weighs factors like payment history, amounts owed, length of credit history, new credit, and credit mix.
- VantageScore®: This model is newer and considers factors like payment history, age and type of credit, credit utilization, balances, new credit, and available credit.
Since these models use different weights for each factor, it’s natural to see variations in your credit scores across different bureaus
Now, let’s dive deeper into the world of credit bureaus:
1. Equifax:
- Founded in 1899, Equifax is the second-largest credit bureau in the U.S.
- They use the FICO® scoring model with a range of 280-850.
- Equifax’s credit score breakdown:
- Payment history (35%)
- Credit utilization (30%)
- Credit age (15%)
- Different types of credit (10%)
- Number of inquiries (10%)
2. Experian:
- The largest credit bureau in the U.S., Experian maintains credit information for over 220 million consumers.
- They also use the FICO® scoring model with a range of 300-850.
- Experian’s credit score breakdown:
- Payment history (35%)
- Credit utilization (30%)
- Credit age (15%)
- Different types of credit (10%)
- Number of inquiries (10%)
3. TransUnion:
- TransUnion gathers information on over 1 billion consumers worldwide.
- They use the FICO® scoring model with a range of 300-850.
- TransUnion’s credit score breakdown:
- Payment history (40%)
- Credit utilization (20%)
- Credit age (21%)
- Recently reported balances (11%)
- New credit (5%)
- Available credit (3%)
So, which credit bureau is most used?
There’s no clear winner here. All three bureaus are widely used by lenders, credit card companies, and other financial institutions.
But which one is most accurate?
Again, there’s no definitive answer. Each bureau uses different methods to calculate your credit score, and discrepancies can occur due to variations in the information they receive.
The key takeaway:
Don’t get hung up on slight differences in your credit scores across different bureaus. Instead, focus on building a strong credit history overall by paying your bills on time, keeping your credit utilization low, and managing your credit responsibly.
Here are some additional tips to boost your credit score:
- Check your credit reports regularly: You can get free copies of your credit reports from each bureau once a year at AnnualCreditReport.com. Review them for any errors and dispute any inaccuracies.
- Pay your bills on time: This is the most important factor in your credit score. Set up automatic payments or reminders to avoid late payments.
- Keep your credit utilization low: Aim to use less than 30% of your available credit. This shows lenders that you’re responsible with credit.
- Limit new credit applications: Every time you apply for new credit, a hard inquiry is placed on your credit report, which can temporarily lower your score.
- Become an authorized user: If you have a friend or family member with good credit, ask them to add you as an authorized user on their credit card. This can help you build your credit history without having to open a new account.
Remember, building a good credit score takes time and effort. But by following these tips and understanding the role of credit bureaus, you can put yourself on the path to financial success.
And hey, if you’re feeling overwhelmed, don’t hesitate to seek help from a financial advisor or credit counselor. They can provide personalized guidance and support to help you achieve your financial goals.
6 reasons why your credit score differs
- Credit scoring model: A variety of models are available to score your credit history. However, FICO or VantageScore are the two primary credit scoring models that are usually used by lenders. Both businesses assess the same primary elements of your credit history, such as your payment history and utilization rate, but they weigh each element differently based on their own formulas.
- Score version: There are numerous credit score variations that are divided into base scores and scores unique to certain industries. Base scores, such as FICO® Score 8 or VantageScore 3. 0, show lenders the likelihood you’ll repay any credit obligation. Industry-specific scores, like the FICO® Auto Score 9, which is used to make auto loan decisions, indicate your likelihood of repaying a particular loan.
- Credit bureau: Information from your credit report, which is obtained from one of the three main credit bureaus (Expperian, Equifax, or TransUnion), is used to calculate credit scores. Your score varies according to the data that each bureau received; this is covered in more detail below.
- Details given to the credit bureaus: Not all of the information about your credit accounts may be given to the credit bureaus. It’s surprising to learn that lenders are not obligated to report to any or all of the three agencies. Even though the majority do, there’s no assurance that the data will be consistent, which could lead to variations in your scores.
- Date scores are accessed: There could be differences if you check your credit score at different times because one of the scores might not be current.
- Errors on your credit report: Any inaccuracies on your credit report may be reflected in your credit score. Your credit score from a report that has errors may differ from one that doesn’t if the errors are limited to one bureau. To protect your credit score, you should dispute any inaccuracies on your credit report as soon as possible.
Our top picks of timely offers from our partners
Lenders use your credit score, which is a three-digit figure, to decide whether to approve you for financial products like loans and credit cards.
While credit scores normally range from 300 to 850, it can be difficult to determine which version you are being assessed on during the application process because there are numerous variations, from base scores to industry-specific scores.
It can be challenging to determine what credit score range you fall into and which products you have the best chance of qualifying for when you check your score with your credit card company or on a personal finance website only to discover that it differs on another. Additionally, when a lender obtains your credit score, they might do so from Experian, Equifax, or TransUnion, or they might ask for a particular version that differs from the one you checked.
The majority of credit scores include the same elements, including length of credit history, utilization rate, payment history, number of new inquiries, and range of credit products. However, there may be score differences for a variety of reasons, which CNBC Select breaks down below.
Which Credit Bureau is Most Important
FAQ
Which credit bureau is most accurate?
Which credit bureau is most used by banks?
What credit bureau score is most important?
Is Equifax or TransUnion higher?