What is a credit score mismatch?

Your credit score is a three-digit number that gives lenders an idea of ​​your creditworthiness. This is usually the first thing lenders check to determine if you approve loans, credit cards, and other loan products.

Three major credit bureaus – Equifax, TransUnion and Experian – create credit ratings based on their own credit scoring algorithms. These agencies weigh the same factors: payment history, credit utilization rate, length of credit history, new requests, and loan structure.

However, don’t be surprised if you find that your credit score differs from major credit bureaus. That’s why:

What is a credit score mismatch?

Credit score mismatch is the difference in your credit score from one credit bureau to another. In most cases, differences in scores are not unusual, as there are differences in the information held in credit bureau files. In addition, these credit reporting agencies use different scoring models to obtain credit scores.

FICO is a long-established scoring model used by 90% of the top lenders in the US. Since FICO generates three scores – one for each agency – you will likely have three different FICO scores.

VantageScore is another widely used scoring model, created jointly by three major credit bureaus. So you only have a VantageScore number, which is likely to be different from your FICO credit score.

Why do credit bureaus report differently?

There are several typical reasons why major credit bureaus create different credit ratings:

1. Credit bureaus have different information

Each bureau creates credit scores using the data they have on file. If the data is different, it goes without saying that your credit score will also be different.

Why do bureaus store various consumer information in their database? One reason is that some lenders do not share information with all three major credit agencies. For example, your credit card company may only report to one credit bureau. As long as you make regular, timely payments, it won’t affect your credit scores from agencies he doesn’t report to.

2. Valuation Models Work Differently

Another reason that credit scores differ is that scoring models weight scoring factors differently. FICO emphasizes your current credit balance, while VantageScore focuses more on the length of your credit history and credit balance.

3. Complex requests from one agency

When you apply for a loan or credit card, the lender will usually retrieve one of your credit reports to see your payment history and how well you are managing your credit. These tough requests can cause a temporary drop in your credit score. A lender or lender often receives a credit report from only one agency. Therefore, only that bureau’s credit report will list a complex request, resulting in a difference in your credit score.

4. Bureaus create scores at different times

Whether you, a lender or another company asks for your credit score, it is a snapshot of your current credit history. Keep in mind that your scoring data usually changes every month as the companies and lenders you work with usually update their information on a monthly basis.

How is the credit scoring formula different?

The five main categories of credit rating have remained unchanged for decades. These include: payment history, debt amounts, length of credit history, new accounts and types of credit. But there have been changes in the number of points assigned to various calculations in these categories.

These formula adjustments are being introduced into an increasing number of points. Lenders currently use over 50 scoring formulas. Why so many points?

• Counters develop their own formulas. FICO, VantageScore and major lenders who create their own custom scoring systems produce their own scores. The formulas are proprietary secrets, so they don’t always work the same way.
• Different versions of scoring models. All scoring models are updated every few years to improve their predictive value. They have names like FICO 8, FICO 9, VantageScore 2.0 and VantageScore 3.0. Because lenders are slow to roll out updates, one bank might check your credit with FICO 8 while a bank across the street might use FICO 9.
• Industry ratings. For example, a car loan’s credit score can add weight to your car loan payment history. FICO Auto and FICO Bankcard Industry Option scores are examples of formulas that add weight to credit information for certain types of loans.

Should I be worried about the difference in the score?

Each credit bureau uses different scoring models and maintains its own credit report data, so it’s not unusual for your three credit scores to vary slightly. But the difference in credit scores can be astounding when new negative information is added to your credit report.

Any difference of more than 20 points should be cause for concern. You may be looking for more advanced reporting or rating options, such as late payments, fees, or high usage cards. If an element of this kind appears in one or two, but not all three, credit bureau reports, you may see a difference in scores between the three bureaus by more than 20 points.

What to do about a credit score mismatch?

Minor credit score discrepancies are not worth worrying about. There are others.

For example, if you have paid off the majority of your debt, you want this positive information to be included in the reports of all three bureaus. If this is not the case, discuss the inaccuracy with a credit bureau that does not show it.

If you have a pending mortgage, you can even expedite the dispute process by asking your mortgage broker or lender to submit a “quick reassessment” request, which can update your report in just a few days.

bottom line

If you notice a significant discrepancy in one or more of your credit scores, the first step is to review all three of your credit reports from Equifax, Experian and TransUnion. You can order reports for free at AnnualCreditReport.com.

Keep a close eye on any errors or fraudulent information. If there is anything in your report that looks incorrect or unusual, dispute that information with the credit bureau.