How Credit Works

You may notice that depending on where you go to check your credit score, your number seems to fluctuate. If you are wondering, “Why are my credit scores different?” you are not alone.

There are different credit scores because there are three different major credit bureaus in the U.S. that independently calculate your score in order to ensure fairness: Experian, Equifax and TransUnion. On top of this, your lender may also use different credit scoring models with a different credit reporting agency.[1]

There are two widely used credit scoring models, the FICO® Score and the Vantage Score. The main difference between the FICO score and the VantageScore is that the VantageScore, creates a single tri-bureau model that can be used with a credit report from Experian, Equifax or TransUnion and the FICO score creates bureau-specific scoring models.[2]

Why are there different credit scores from each credit bureau?

Each bureau gathers information on your credit accounts used in their systems independently and none of the three major bureaus share information with the others - meaning they could potentially be working with different information. That means it is not uncommon to have multiple credit scores.

This often occurs when an account in your credit history has been reported to one credit bureau but not another. Lenders have the option to pull your credit rating from any of the three bureaus and you can never be sure which one lenders will use. Because of this, it’s important to monitor all three bureaus’ credit reports continuously.

Why it’s important to check your credit scores

By regularly checking your credit score, you can look out for any discrepancies or potential identity fraud that may be having a negative impact on one or more of your scores. Some credit card companies and FinTech apps like Credit Karma provide you with your credit score for free. Some offer FICO scores and others offer VantageScore, so be sure to check which scoring model is being used and consider this when looking at the score. Also make sure to consider which scoring model lenders might use when you are applying for credit.

The difference between credit scoring models

FICO® credit scores had no real competition until 2006, when the three major credit reporting bureaus — Experian, TransUnion and Equifax — jointly developed an algorithm to produce a new score: the VantageScore.[3]

While FICO® and VantageScore are the most widely used, there are several other versions and providers of credit scores. Some scores are directly developed by credit bureaus, while others are developed by outside companies. The strength of your credit score depends on the scale used by the scoring model.

While some will try to differentiate themselves by claiming to be “the best,” there is no one universal credit score or credit scoring model that is better than the others.

So, why am I seeing so many different credit scores?

If you’re seeing multiple credit scores from each bureau, there could be a few reasons for this. Here are some of the most common explanations for score differences.

1. The scores are from different dates. Your score can change at any time. Because information in your credit reports may be updated at different times at each bureau, one credit bureau may be missing an account or other information that either helps or hinders your score. If you pulled your credit report last week from one bureau - there’s always a chance it could be different this week based on new reports from lenders or credit card companies.
2. The difference in how lenders report information to the bureaus. The way lenders report information to the credit bureaus could vary. For example, a mortgage or auto lender may supply credit information to only two of the three credit bureaus. This is more common than you may think. Some lenders report to all three credit bureaus, while others may report to none at all. It’s also a good idea to check your credit reports for errors periodically since an error could affect your score.[4]

Did you know?

• Creditors are not required to report your account information to the credit bureaus. While businesses are legally required to report accurate information, there’s no law that requires them to report information at all. When applying for a loan - make sure the lender reports your payment history to all three bureaus.[5]
• You may have applied for credit under different names (for example, Robert Jones versus Bob Jones) or a maiden name, which may cause fragmented or incomplete files at the credit reporting agencies. In most cases, the credit bureaus combine all files accurately under the same person, but there are many instances where incomplete files or inaccurate data (social security numbers, addresses, etc.) cause one person’s information to appear on someone else’s credit report.

How to make sense of differing credit scores

While it can seem confusing that you have varying credit scores, most of the credit scoring models used to create each credit report use similar information. This means if you check your credit score through one method, in general, you'll likely have a similar or equally good or bad credit score on the other methods.

The score used to determine whether you’ll be accepted for a loan, car finance, or mortgage will vary from lender to lender.

How to build your credit score

Even though differences in credit scoring models mean you'll get different scores, the methods you can use to lift your score remain the same. Here are some steps you can take to build your credit score:

• Pay your bills on time - If you have different credit accounts with a history of on-time payments, this will contribute positively to your credit score. Late payments can remain on your credit report for seven years, however, the negative impact of these late payments on your credit score diminishes over time.
• Vary the type of credit you use - A good credit mix demonstrates that you can manage different types of credit such as auto loans, personal loans, and credit cards.
• Keep credit utilization low - Your credit utilization ratio refers to how much of your available credit you're actually using. Keeping this low demonstrates that you are spending within your means and not maxing out credit cards you may be unable to pay off.
• Become an authorized user - Asking someone you trust to add you to their credit account as an authorized user can help you build credit if you don't have much credit history. Keep in mind that this could damage your score if you become an authorized user on an account with a negative payment history or high credit utilization ratio.

Summary

Though all your credit scores may vary, each credit score is based on information in your credit reports. As long as you maintain a good credit score, you should be more likely to qualify for a loan or another credit card in the future. So focusing on what’s in your reports, such as timely payments, accurate information, how much credit you are using and the variety in the types of credit you use, could help build your credit overall.

Sources

1. Why Are There Different Credit Scores? - Equifax https://www.equifax.com/personal/help/different-credit-scores/#:~:text=Although%20your%20credit%20scores%20are,history%2C%20while%20another%20may%20not
2. The Difference Between VantageScore and Fico Scores - Experian https://www.experian.com/blogs/ask-experian/the-difference-between-vantage-scores-and-fico-scores/
3. About VantageScore - https://www.vantagescore.com/company/about-vantagescore/
4. Why Do My Credit Scores Differ Across the Credit Bureaus? - Experian https://www.experian.com/blogs/ask-experian/why-do-my-credit-scores-differ-across-the-credit-bureaus/
5. What is a Credit Report? - Consumerfinance.gov https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-report-en-309/#:~:text=Creditors%20are%20not%20required%20to,rates%20they%20will%20offer%20you.