You’re not alone if you’ve ever looked up your credit score and discovered that it varies from one credit bureau to another. The three main credit bureaus, Equifax, Experian, and TransUnion, actually frequently have different credit scores. Actually, it’s not uncommon for scores to vary by fifty points or more.
This disparity can be perplexing and upsetting, particularly if you’re attempting to gauge your general creditworthiness. However, don’t worry—we’re here to assist! In this thorough guide, we’ll explore the reasons why your Experian credit score may be higher than your TransUnion credit score and provide you practical advice on how to raise your credit scores with each of the three bureaus.
Understanding Credit Scores and Credit Bureaus
Before we dive into the specifics of TransUnion vs. Experian score discrepancies let’s take a step back and understand the basics of credit scores and credit bureaus.
What is a Credit Score?
A credit score is a three-digit number that represents your creditworthiness, or how likely you are to repay debt. Credit scores are calculated using information from your credit reports which are maintained by the three major credit bureaus: TransUnion Experian, and Equifax.
What are Credit Bureaus?
Credit bureaus are companies that collect and maintain information about your credit history. This data consists of your credit account types, length of credit history, credit utilization, payment history, and amounts owed. Using this data, lenders evaluate your creditworthiness and decide whether to grant you credit for credit cards, loans, and other types of credit.
Why Do Credit Scores Differ Across Bureaus?
With our foundational knowledge of credit scores and credit bureaus established, let’s investigate the potential reasons why your TransUnion score could be lower than your Experian score:
1. Different Information Reported:
Each credit bureau may have slightly different information about your credit history. This is because not all lenders report to all three bureaus. Additionally, some lenders may report information to different bureaus at different times. This can lead to discrepancies in your credit reports and, consequently, your credit scores.
2. Different Scoring Models:
The three major credit bureaus use different scoring models to calculate credit scores. These models vary in how they weigh different factors in your credit history. For example, TransUnion’s VantageScore model places a greater emphasis on your payment history than Experian’s FICO model. As a result, your TransUnion score might be lower if you have a few late payments on your record, even if your Experian score is higher.
3. Timing of Inquiries:
Your credit score can be temporarily lowered if you have recently applied for new credit. This is because credit inquiries, which are recorded on your credit reports, can negatively impact your score. If you have recently applied for a loan or credit card with a lender that reports to TransUnion but not Experian, your TransUnion score might be lower than your Experian score.
4. Errors in Your Credit Reports:
It’s possible that there are errors in your credit reports that are affecting your scores. These errors could include inaccurate information, such as accounts that you never opened or payments that you made on time but are being reported as late. If you suspect that there are errors in your credit reports, you should dispute them with the credit bureaus.
How to Improve Your TransUnion Score:
If you’re concerned about your TransUnion score being lower than your Experian score, there are steps you can take to improve it:
1. Check Your Credit Reports for Errors:
The first step is to check your credit reports from all three bureaus for errors. You can get a free copy of your credit reports from AnnualCreditReport.com. Once you have your credit reports, carefully review them for any inaccuracies. If you find any errors, dispute them with the credit bureaus.
2. Pay Your Bills on Time:
Your payment history is the most important factor in your credit score. Make sure to pay all of your bills on time, every time. Even one late payment can have a negative impact on your score.
3. Keep Your Credit Utilization Low:
Your credit utilization ratio is the amount of credit you are using compared to your total available credit. Aim to keep your credit utilization below 30%. This means that if you have a credit card with a $1,000 limit, you should try to keep your balance below $300.
4. Limit New Credit Inquiries:
Every time you apply for new credit, a hard inquiry is placed on your credit report. Hard inquiries can stay on your credit report for up to two years and can lower your credit score. Try to limit the number of new credit inquiries you make each year.
5. Become an Authorized User on a Credit Card with Good Credit:
If you have a friend or family member with good credit, you can ask them to add you as an authorized user on their credit card. This will give you access to their credit history and can help to improve your credit score.
While it’s normal for credit scores to differ across different credit bureaus, a significant discrepancy between your TransUnion and Experian scores can be concerning. By understanding the reasons for this discrepancy and taking steps to improve your credit score, you can work towards closing the gap and achieving a higher credit score across all three bureaus. Remember, a good credit score is essential for securing favorable interest rates on loans, qualifying for credit cards, and obtaining affordable insurance premiums.
Additional Resources:
- Experian: https://www.experian.com/blogs/ask-experian/why-do-my-credit-scores-differ-across-the-credit-bureaus/
- TransUnion: https://www.transunion.com/credit-help/credit-scores/why-are-my-credit-scores-different
- Equifax: https://www.equifax.com/personal/education/credit/article/why-are-my-credit-scores-different
- AnnualCreditReport.com: https://www.annualcreditreport.com/
Frequently Asked Questions (FAQs):
Q: Why is my TransUnion score lower than my Experian score?
A: There are several reasons why your TransUnion score might be lower than your Experian score. These include different information being reported, different scoring models being used, the timing of inquiries, and errors in your credit reports.
Q: How can I improve my TransUnion score?
A: You can improve your TransUnion score by checking your credit reports for errors, paying your bills on time, keeping your credit utilization low, limiting new credit inquiries, and becoming an authorized user on a credit card with good credit.
Q: Is it important to have a good credit score?
A: Yes, a good credit score is essential for securing favorable interest rates on loans, qualifying for credit cards, and obtaining affordable insurance premiums.
Q: How often should I check my credit reports?
A: You should check your credit reports from all three bureaus at least once a year. You can get a free copy of your credit reports from AnnualCreditReport.com.
Q: What should I do if I find an error in my credit report?
A: If you find an error in your credit report, you should dispute it with the credit bureau. You can do this online, by mail, or by phone.
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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.
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.