Why Are My Credit Scores So Different?
The subject of credit scores can be genuinely frustrating for a lot of consumers. You know that your credit scores matter. You know that they can either open or close doors to opportunities for you and your family. However, you may not feel like you really understand the rules of credit scoring.
Here is an example of a scenario which often drives consumers crazy. You apply for a vehicle loan and you are told by the dealership’s financing department that your credit score is 580, too low to qualify for the financing you want at the price you can afford. You visit another dealership and the financing department informs you that your credit score is 550. Frustrated, you check your credit scores online and discover not 1, but 3 completely different sets of numbers. So which score is correct and how can they be so different?
3 Credit Reporting Agencies
First things first. It is important to understand that your credit reports are created by the 3 major credit reporting agencies (CRAs), also known as credit bureaus. You have a separate credit report created by each CRA – Equifax, TransUnion, and Experian. Your 3 credit reports are similar, but rarely are they identical. You might, for example, have a personal loan which is reported to only 1 CRA or a collection account which only appears on one of your credit reports.
The differences in your credit reports can be one of the leading reasons why your credit scores may vary. Unless you are applying for a mortgage, most lenders will only pull 1 of your 3 credit reports whenever you apply for financing. Therefore, if you shopped at multiple car dealerships in the same day there is no guarantee that the different financing departments and lenders consulted would even be looking at the same credit report. One lender might pull a report from Equifax. The next might pull from TransUnion or Experian.
Credit scores are based on the information contained in your credit reports. So, if your Equifax and your TransUnion reports contain different data then the scores generated from those reports will likely be different as well, even if the lender is using the same scoring model to score those reports. Different data on credit reports leads to different credit scores.
Multiple Brands, Varieties, and Models
Credit scores are add-on products. Not every credit report comes with a credit score associated with it. Instead, credit scores are often purchased along with credit reports by lenders, insurance companies, and other businesses to help them assess risk. Lenders, for example, purchase credit scores to help them determine the likelihood that you will become at least 90 days late on any of your credit obligations within the next 24 months.
Since credit scores are products, it goes without saying that lenders can decide which scores they want to purchase. A large number of lenders purchase FICO brand credit scores, especially within the mortgage industry. However, there are also a growing number of lenders who use the VantageScore brand credit scores as well.
In addition to the fact that there are multiple brands of credit scores, those brands can come in different varieties (i.e. auto scores, mortgage scores, general scores, etc.) and different models as well (1.0, 2.0, 3.0, etc.). When you apply for a loan one lender might look at the FICO 8 Auto Score based on your TransUnion credit report. The next lender might be viewing the VantageScore 3.0 scores based upon your Experian credit report.
As you can see with 3 different credit reports, multiple brands, and many varieties and models there is a lot of room for differences in your credit scores. You actually have hundreds of different credit scores. The good news is that all of these scores are based on the same information – the data contained in your 3 credit reports. Focus on maintaining good credit management habits and you will probably be pleased with your credit scores no matter who checks them.