Understanding Credit Score Differences

Understanding Credit Score Differences

There are few numbers in life that matter as much to your financial outlook and well-being as your credit score. However, confusion is the norm for consumers when it comes to this important financial gauge.

The History of Credit Scores

Prior to the creation of standardized credit scores, lenders and loan officers would often develop their own "score card" to assess the risk of lending to a particular borrower. This score card could vary drastically from one lender to the next. The major issue with this original method was that it was based on a loan officer's ability to judge risk, rather than a common set of rules and specific calculations.

So, in the 1980's, the Fair Isaac Corporation set up the first general purpose credit scoring system based on credit bureau information in order to help remove the inherent inconsistencies that arose from having each lender perform their own credit diagnostics. It has since become known as the FICO score and the algorithm has been widely adopted by America's largest credit reporting agencies.

Why would my score differ between credit agencies?

The three major credit bureaus are Equifax, Experian and TransUnion. If you're seeing different scores from each bureau, there could be a few reasons for this. Here are some of the most common ones.

  1. The scores are from different dates. Since your score can change at any time, it's important to compare credit scores from the same date.
  2. The scores were calculated using different scoring models. We'll get into this in the next section, but it's important to know that there are many scoring models out there. When you compare scores among bureaus, make sure they are calculated using the same model. Even with the same model, your scores could vary because each bureau may store information or calculate the score a little differently.
  3. The information in your credit reports varies among credit bureaus. This actually isn't uncommon. Some lenders report to all three credit bureaus, but others report to just two or one or none at all. The information in your credit reports may also be updated at different times at each bureau. In other words, one credit bureau may be missing an account or other information that either helps or hinders your score.

Of course, it's also a good idea to check your credit reports for errors periodically since an error could affect your score. You can check your TransUnion and Equifax credit reports for free on Credit Karma and your Experian report on www.AnnualCreditReport.com.

Why would my score differ between the same credit agency?

Like a thumbprint, no credit score model is exactly the same. Each credit score model has a slightly different formula for weighing credit score factors. The credit bureau can use dozens of different credit score models based on the requirements of different lenders. As an example, a mortgage lender may use a different scoring model than an auto lender because they each place importance on different factors.

Though your scores may vary, they're all based on information in your credit reports. So focusing on what's in your reports could help you build your credit overall.

Other Available Scores

While FICO is the most famous, there are several other versions and providers of credit scores, such as VantageScore, NextGen, BEACON and EMPIRICA. Some scores are directly developed by credit bureaus, while others are developed by outside companies.

Is there a "best score"?

In a word, no. In order to protect revenues, credit reporting agencies will often position their scores as the best or the most predictive. In reality, all scores must adhere to similar guidelines to be truly predictive, regardless of the final output number. All credit scores are built from the same base set of data and statistical procedures.

Like many products and services in the marketplace, there are a plethora of different options for you (and the businesses that serve you) to choose from, simply because every buyer is different. Based on cost and effectiveness in each buying situation, there are credit scores for sale to satisfy each customer.

Score Ranges

Just as a point of reference, it may be important for you to know what the score ranges are for each of the major scoring systems. The higher your score the better, as it is a general gauge of your overall creditworthiness in the eyes of lenders.

  • FICO Score: 300 -850
  • Score from Experian: 330-830
  • Score from Equifax: 300-850
  • Score from TransUnion: 300-850
  • VantageScore 3.0: 300-850

Bottom Line

Because there are hundreds of credit scores that measure many different probabilities, consumers generally do not need to be overly concerned with the type of score or even their number. It's also important to note that your credit score is a variable which can change every time your credit report changes. For these reasons, monitoring changes within a single score over time can be a better way to gauge your overall credit health.

These complicated facets of credit scores are exactly why we developed Credit Karma. By keeping the bureau and credit scoring model consistent, we are hoping to provide consumers with a single, easier-to-follow point of reference on their credit health. Best of all, it's always free to check your credit score with us. In this way, you can access your score as often as you want and always have a consistent baseline to better understand how your score is changing.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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1 Contribution
91 People Helped

Helpful to 91 out of 96 people

Credit Karmas Transunion score for me has been the same when I pulled a Transunion report. I also have Life Lock which provides all three scores using Transunion as the main one. I have found them and Credit Karma consistent in their reports. As I understand the Credit card companies and others report your debt on the first of each month. That is why I pay my cards down before then and see my score rise. By taking your total credit card combined and adding them you then can divide that by your total credit limits. Example: One card has $5000 limit and another has $1500 limit which would give you $6500 total. Your debt on both cards are at $4500.

By taking $4500 divided by $6500 = 69% of your card usage. I think the credit agencies favor in a score best for those that are below 30%. Credit card have the worse effect on score. That could raise you back up about 10 points or more. I love Credit Karma and appreciate their services. I took up one of their offers on a Truck payment and lowered it from 6.9% to 2.98% which is saving me a bundle. Life insurance was the same. That offer some great services considering there was nothing back in the 70s or even 90s that could help some one moniter their credit.

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4 Contributions
70 People Helped
Helpful to 43 out of 50 people

"Credit card have the worst effect on score". Correct and Incorrect.

Credit cards are basically needed to start your credit score at a good level. I knew people who didn't have credit cards. Their score was terrible. Banks denied loans.

I have 4 credit cards. My score is good because I have at least 2 with less than 30% debt and never make late mayments. I have small and large limits. I also have an active unsecured loan, with college debt.

Remember not to get into the trap of credit cards- spending too much and not paying it off. I ran into that situation (I was almost at my limits) when I graduated college. It took at least 6 months to slice my credit card debt back down and improve my score.

1 Contribution
15 People Helped

Helpful to 15 out of 15 people

I can appreciate this is a free service, and I'll be the first to say I have used this service faithfully for the last 3 years or so.  I think its great we can access it without fear of gimmicky membership trials offered by the 3 bureaus.  

I would be remiss if I didn't express my disappointment in the shift to Vantage scores.  I can also get my free scores using a combination of different credit card accounts that I have, and they all offer my free FICO score.  What used to be great about Credit Karma was that I could view by Transunion FICO score for free. Now I can see my TU and Equifax score for free, but because its a Vantage score, I only visit this site to see if something changes, but not for any other information.  What used to be an every day almanac of my credit information has become a weather vane I glance at every once in a while.  Basically I use it as a queue to go check other sites to find out what my FICO score is.

Thanks to the builders of this site for providing a free service like this, but please consider switching back to FICO.  Its a more meaningful score to consumers.  No one I talk to uses my Vantage score when I apply for credit.  Thanks for listening.

3 Contributions
271 People Helped

Helpful to 200 out of 232 people

So my score was 794,  Then I sold my house and paid off the mortgage and also paid off a car loan and the score drops to 780.  This is such a scam and a joke to the American consumer who is fiscally conservative.  Shouldn't paying off loans increase your score? 

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1 Contribution
220 People Helped
Helpful to 217 out of 237 people

When an account such as a auto loan or mortgage is paid off, the account is then closed. While the account was open, you had a limit and open balance. For example, if you had a $30k auto loan, and a had only a few payments left, you are utilizing less than 10% which will give you a higher score. Once the loan is paid, it is closed and your available credit decreases...hence the lower score. However, this is temporary and your score will increase again over time.

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