No doubt, you are aware of the importance of a credit score. Aside from serving as the fundamental criteria when applying for new lines of credit, a credit score may also be important when an employee begins a new job, when a renter wishes to move into an apartment, and when an individual seeks membership into a club or group.
While those who understand their credit are aware of the three different credit reporting agencies or bureaus — Equifax, Experian and TransUnion — there are different scoring models supplied by the agencies and they each provide a separate credit score. It can be frustrating when you’re applying for new credit, as you don’t always know which one you’re being evaluated on.
Why are credit scores different? What can you do if the scores vary? Does it really matter? Let’s have a look.Five Reasons Why Your Scores Might Differ
The main reason why your scores differ is that the underlying data held by each bureau is different. Here’s why:
- Score and report: A credit score is different from the actual credit report. The providers of scores may or may not be the same as the credit bureaus themselves and each company maintains its own proprietary algorithms to calculate credit scores.
- Timing: Your scores may differ because you pulled them at different times. This might seem absurd, but if you were to check your score from one bureau today, then check your score from another bureau next week, the scores will vary. Keep in mind that there is a time-based component to calculating scores and even seven days can make a difference. As such, when pulling credit reports and checking credit scores, try to do it all on the same day.
- Reporting of data: Not all of the bureaus receive the same information. Because the information on your credit report is supplied by lenders, collection agencies, and governments (i.e., courts) — each of whom may have a different reporting relationship with the bureaus — there is most likely a variation in scores.
- Timing of inbound reported data: Even if the bureaus obtain the same information, they may not receive it at the same time. As a result, one bureau may not have the most up-to-date info which can lead to a different score.
- Human or clerical error: There could be inaccuracies on your report due to human error, such as someone else’s information being inadvertently added to your file. Or, perhaps you opened up accounts using a different name, and that information was not added to your account under your current name.
It’s important to note that the credit scores you are able to access online are often a different version from what banks, credit card companies and other organizations will see. According to personal finance experts at TheBalance.com, “Even though the credit score you’re checking probably won’t match the score your lender receives, it’s still important to check your credit score.”
While you do not have control over the algorithms and the computation behind the scenes, there are still some action items you can take to ensure that your scores reflect the most accurate picture of your credit:
- Pore over your individual credit reports to try and spot any discrepancies or even flat-out errors. You can contest these directly to the credit bureaus and try to get them removed. Each of the bureaus has its own process for initiating disputes.
- Try to stay as knowledgeable as you can about the credit industry. It’s important to understand the risks — but also the benefits — of opening, maintaining and paying off certain types of accounts. Consider subscribing to a credit monitoring and modeling service, such as ScoreMaster, that can perform ongoing “what-if” scenarios based on account payoffs or spending. This will help you understand your credit usage in depth. Ask your bank or employer if they offer ScoreMaster.
- Do different scores matter? The answer is: not really. Having different credit scores is normal. If you’re monitoring your credit and removing any inconsistencies, and if you’ve been paying your bills on time and reducing your debt load, you should have the satisfaction of knowing that all of your scores will likely change.
It’s important to note that regardless of the credit score model and/or version being used, your credit score changes shown in ScoreMaster typically apply to all credit scores the same, including all FICO and VantageScore versions. This is because all credit scores are derived from TransUnion, Experian, and Equifax data, where your payments and spending are reported.*
*FICO® is a trademark of Fair Isaac Corporation and is unrelated to SmartCredit®. TransUnion®, Experian®, Equifax®, and VantageScore® are registered trademarks of their respective owners. Your results may vary and are not guaranteed.