“Why are my credit scores different?” is a common question because it’s a common occurrence. You check your credit scores with one source, but then a lender says you have a different score. Or you get your credit scores from two different websites and the numbers aren’t the same. It can be confusing, so let us explain what’s going on.
There are four main reasons why your scores may be different, and we’ll explore them in more detail here:
- Bureau: Scores are obtained from different credit bureaus
- Source: The company that developed the credit score is different
- Model: The credit scoring model used is different
- Timing: Scores are pulled at different times
And then we’ll tackle the question, “What’s my real credit score?”
1. Bureau: Scores are obtained from different credit reporting agencies
The first thing to understand is that there are three major credit reporting agencies and two companies that create credit scores—mainly FICO and VantageScore. FICO and VantageScore don’t have any information about how consumers handle their bills. Instead they provide the formula used to evaluate the information in a consumer credit report. And that information comes from one of the three main consumer credit bureaus:
These credit reporting agencies don’t share information with one another and it is possible there are differences in your reports from each of these bureaus. For example, a collection account may appear on one of your credit reports and not another. That’s why it is a good idea to review your credit reports with each of the major consumer credit reporting agencies. If you don’t get your full reports from another source, you can check them at AnnualCreditReport.com, the official free credit report website.
2. Source: The company that developed the score is different
FICO scores are the most commonly used credit scores. FICO (formerly Fair Isaac Company) started creating credit scores in the late 1950s.
In 2006, the VantageScore was created as a joint venture among credit bureaus Experian, Equifax, and TransUnion to compete with FICO scores.
In addition, each of the credit bureaus may create their own proprietary credit scores. Sometimes these are used by lenders, and other times they are “educational credit scores” offered to consumers, but not used by lenders to make credit decisions.
Finally, financial institutions may create their own proprietary scores that are not available to the public. They may use information from one of the credit reporting agencies but also customize the score to their customer base. These are often referred to as “custom scores.”
Each score is intended to measure a certain type of risk of a borrower based on information in their credit report. But each one may approach the analysis in a somewhat different way. That means you can get your credit score from the same bureau the same day and the actual number may be different depending on whether it’s a FICO score or VantageScore.
3. Model: The credit scoring model used is different
There is no single FICO score. They come in different versions, referred to as “models.” These scores are updated over time, and some credit scoring models are used for specific types of lending such as auto loans or bank cards (general purpose credit cards.)
Which credit scores do lenders use?
This chart from MyFICO.com illustrates different credit scoring models most commonly used (FICO score only):
As you can see, different scoring models may be used by mortgage lenders, auto lenders and card issuers. You can also see how different models are available through each bureau. For example, for mortgage lending, lenders are likely to pull a FICO Score 4 from TransUnion, a FICO Score 2 from Experian, and a FICO Score 5 from Equifax.
VantageScore, by contrast, has four score versions and 4.0 is the latest version. If you are using a credit monitoring service to view your VantageScore, you are likely to see a VantageScore 3.0.
- Payment History (35%)
- Debt Utilization (30%)
- Credit Age (15%)
- Credit Inquiries (10%)
- Types of Credit (10%)
These factors are included in most credit scoring models, but the weight they carry (in other words, how much they impact your scores) varies by scoring model.
Payment History: Late payments hurt your credit scores. The more recent the late payment, the more it affects your scores, and the greater the number of late payments, the more they affect your scores. (A recent late payment can drop your score as much as 100 points!)
With FICO scores, this factor generally makes up around 35% of your score.
With VantageScore 3.0, it’s the top factor but with VantageScore 4.0 it’s “moderately influential.”
Debt: Revolving debt is also a substantial factor and it is heavily weighted toward credit card debt. There are different ways this factor may impact your scores. With FICO scores, this factor commonly looks at “debt utilization” “credit utilization” or “debt usage” (all terms for the same concept.) It compares your credit balances to your credit limits on your revolving lines of credit such as credit cards.
For example, if you have a credit card account with a $5,000 limit and have a $1,000 balance, your utilization or debt usage ratio is 20%. (Divide the balance by the credit limit.) This is measured both for individual revolving accounts and as an aggregate of all revolving accounts. Higher utilization ratios may impact your credit negatively. This factor is one that can change quickly: pay down a high credit card balance and your credit scores may improve as soon as the new balance is reflected in your credit reports.
With FICO scores, debt usage typically accounts for about 30% of the score.
With VantageScore 3.0 debt usage accounts for about 20% of the score, while total balances/debt accounts for about 11%. With VantageScore 4.0, total credit usage, balance and available credit are together the top factor considered “extremely influential.”
It’s worth noting that some business credit cards report to the owner’s personal credit, which means that high balances due to business activities can impact the owner’s personal credit.
Types of Credit: This factor measures credit mix, or credit diversity, in terms of the types of accounts. If your credit report shows that you have a few credit cards, a car loan, a student loan, and a mortgage, for example, you will likely have a higher credit score than someone who only has one credit card and a personal loan.
With FICO scores, credit mix accounts for roughly 15% of your credit score.
With VantageScore 3.0, age and type of credit together account for about 20% of the score, and with VantageScore 4.0 credit mix and experience are the second most influential factor, considered “highly influential.”
Credit Age: Credit age evaluates the length of credit history. It indicates how long you’ve had credit and is measured by looking at your oldest account, youngest account and the average age of all your credit accounts. The older your credit, the better. New accounts can lower your average credit age.
With FICO scores, this factor accounts for roughly 10% of your credit score.
With VantageScore 3.0 age and type of credit together account for about 20% of the score, and with VantageScore 4.0 age of credit is the next to last factor, considered “less influential.”
Credit Inquiries: Credit inquiries refers to requests for your credit reports/scores – a.k.a. “inquiries.” Hard inquiries typically drop scores by 3-5 points though that range can vary slightly. While inquiries stay on your credit reports for two years, they typically only affect your scores for one year.
Not all inquiries affect your credit scores the same way, so make sure you understand how inquiries work if you are concerned about this factor.
With FICO scores, this factor accounts for roughly 10% of your credit scores.
With VantageScore 3.0 it’s around 5% and with VantageScore 4.0 it is the least influential factor.
FYI: Checking your credit scores with Nav is a soft inquiry and does not impact your personal or business credit scores. In addition, most lenders evaluating applications for small business loans often use a soft credit check on the owner’s personal credit initially. If the owner decides to proceed with the loan there may be a hard credit check.
As you see from this description of the score factors, the same information may have a different impact depending on which credit scoring model is being used.
4. Timing: scores are pulled at different times
Credit reports are updated all the time. A credit score is created based on current data from the credit reporting agency that was used to create the score. Because credit reports are real-time, it is possible for your credit score to change from one minute to the next depending on what is being reported. For example, if you have paid your credit card bill and as a result, your revolving credit balance has dropped significantly, your score can change as soon as that new balance hits your credit reports. In this example, it is possible to see a significant score change depending on how much debt has been paid off.
Why your credit scores can be significantly different
If your credit scores are significantly different, you can first look into the reasons above to determine why. But the most common reason for a large gap is that one of the credit bureaus has information the others do not. If that information is negative— a collection account is a common example— that may result in the credit score from one credit bureau being very different from the others.
Review your credit reports carefully to see if there are accounts or other information that does not appear on your reports with the other major credit bureaus.
Which score is my real credit score?
It’s logical to wonder which score is best. The answer, though, is that the only score that really matters is the one the lender uses to evaluate the loan application for the financing you want. Typically you won’t know which particular consumer reporting agency or scoring model the bank, credit union or other type of lender will use to make a lending decision. (In a few cases, such as a mortgage application, the lender will obtain multiple credit scores from different bureaus.) So your best approach is to understand the main scoring factors and work to make each as strong as possible.
What’s a good credit score?
Most consumer credit scoring models run from 300— 850 though there are some used less often that have a different score range. Each lender determines which range is acceptable, and which score ranges help a borrower qualify for the best terms. So again, there’s no single score that’s considered “good.” However, myFICO offers a credit score calculator that helps you understand the average interest rate by credit score range. If you are shopping for a consumer loan, it can be helpful.
What is the most accurate credit score?
This is a difficult question to answer, as you’ve learned. Different credit scores are designed to evaluate creditworthiness in different ways. Ultimately, though, a credit score is only as accurate as the information used to calculate it. That means it’s essential to review your credit reports to make sure they are accurate. If they are not, you have the right to dispute information.
What to do if there are errors on your credit report
You have the right under federal law to dispute information in your credit report you believe is inaccurate or incomplete. You can dispute errors on your credit reports in one of several ways:
- Online directly with the credit bureau reporting the mistake
- By mail directly with the credit bureau reporting the mistake
- With the lender/company reporting the wrong information
Each method has pros and cons. Disputing online is fast and efficient, and you can often get a response quickly. Disputing by mail can be best for situations where you need to include extensive documentation. And disputing directly with the lender/company reporting the information means that if the company makes a correction, they will need to report that to all the credit bureaus that have the wrong data.
How to improve your credit scores
If your credit scores are keeping you from being approved for the small business financing you need, you may need to work on repairing your credit. There is a lot that can be written on this topic, but here are a few essential tips:
Step 1: Identify what’s bringing down your scores. The main factors affecting your credit scores are provided when you request your credit scores. Review them carefully.
Step 2: Identify where you can make improvements. Can you pay down credit card balances? Refinance with a personal loan? Negotiate with a collection agency to stop reporting an account if you pay it? The steps you can take will depend on what’s impacting your credit scores and whether that information can be changed. (Most negative information can be reported for seven years.)
Step 3: Build strong credit references going forward. Make sure you have at least a couple of accounts currently open and reporting to the major credit bureaus. Pay them on time each month and keep balances low.
Step 4: Monitor your credit. Improving your credit takes time. With credit monitoring, you can track your progress over time.
As you can see, the answer to the question “why are my scores different?” can be complex. The bottom line is that you should make sure the underlying credit information is correct on each of your credit reports.
Free credit reports and free credit scores will help you monitor the information on your credit. (Make sure you’re checking with all the major credit reporting bureaus.) Keep in mind that a credit freeze may inhibit your ability to check your reports or scores from certain sources.
Staying on top of your credit using the resources listed here can not only help you identify problems as well as build credit to get the financing you need.