Understanding Credit Score Differences

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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.

Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Email us at corrections@creditkarma.com. For questions about your Credit Karma account, please submit a help request to our support team.

Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

All Comments

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4 Contributions
108 People Helped

Helpful to 2 out of 2 people

The reason your score differs between the agencies is because the whole system is a crock of crap designed to rip off more money for you than necessary.

3 Contributions
5 People Helped

Helpful to 2 out of 2 people

I think Credit Karma is a good thing. They say that nothing is really free in this life. CK appears to be free. I realize that not everything is up to date. I think they have my mortgage listed twice because I only have a mortgage with one company. No credit card with my mortgage company either. I feel sorry for people pay for their credit reports through certain credit card companies. It is such a scam. I think we can get one free credit report each year through the three agencies. I just never bother. What we really need to get rid of is the IRS. If that is not possible, then we all need a simple one-page form. Everything the goverment gets involved in becomes too complicated. I'm surprised that they are not running the credit agencies. 
 

Top Contributor

Reply by
icuhowie

1497 Contributions
2899 People Helped

Someone does get it.   Yahoo!

2 Contributions
40 People Helped

Helpful to 40 out of 55 people

Getting penalized for not having debt is a no,no! It's just not right that you HAVE to HAVE some kind of history of debt payment to get good rates. I so bad want to pay cash for everything (working on that) and not worry about all this doodoo! Someone needs to put a cattle prod to the credit agencies to do an accurate job at reporting. And a faster job on taking off things that are paid off and don't need to be on record. They're sure quick to add the negative to your list. How about we all barter---------?

Reply by
silent357

1 Contribution
24 People Helped
Helpful to 24 out of 27 people

In order to get credit, you would have to show you can pay on/ off a loan or credit card. It's that simple. If you have no debt, how are agencies/creditors supposed to know if you can handle paying on a loan? Just my opinion.

Reply by
Tashinawin

8 Contributions
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Helpful to 4 out of 6 people

You are right It's NOT fair.  And although it may not be good for consumers, that mode IS good for the credit card companies and banks who loan out the money.  If you look at the fine print on any credit card agreement, it basically says they can change anything they want at anytime.  If you don't like it, your option is to close the account and pay off the remaining balance. Which, by the way would make your credit rating go down for a while.

They want to to carry sustainable balances and to continue to pay them off over a very, very long time so they can make more money off of you.  But not TOO much debt relative to your credit limits. Otherwise, you might claim bankruptcy and they lose their money.  But don't worry.  Credit card companies and the banks that offer them  NEVER lose money overall on their credit card business.  Which is fine by me.  I just wish they weren't QUITE so predatory.

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Reply by
eddie1261

24 Contributions
256 People Helped

You going to pay cash for everything including a home? You need credit, whether you agree with that or not. Lenders need to see a positive history of you paying your bills before they shell out $225,000 for a mortgage.

2 Contributions
1 Person Helped

Helpful to 1 out of 1 people

Great attempt to mask the fact that anything to do with Credit Score's are just a best guess effort, Here is the one thing you can count on ! Lenders will use which ever formula that will allow them to make the Highest Interest rate !! That's how they make 12-29% credit card fee's........

1 Contribution
1 Person Helped

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I need an Equifax (FICO) score of 640 to get a mortgage. Here my score is 705. I checked with them a couple days ago (paid for my score on their site) and my score is 627. Needless to say I was very VERY disappointed. Oddly my Transunion score here is within 3 points of my Transunion FICO score. I also get a Transunion score from my Capitol One card and it has it 70 points lower than my FICO score. My lender (who is to pre-approve me to go house shopping) actually recommended that I use Credit Karma to try to improve my score and I've done almost everything recommended (paid everything off, got a credit card, etc) and it's been over a year with barely a nudge for my Equifax score.

1 Contribution
3 People Helped

Helpful to 3 out of 3 people

I would urge all folks (particularly fellow senior citizens) who have no debt, no late payments, and MINIMAL credit card usage (something that Trans Union seriously downgrades you for) to take a long hard look at what that does to your AUTO INSURANCE RATES!!  In our case, we flipped the policy over into my spouse's name and instantly saved $235 per year.  Then, when you learn that you, too, are getting shafted, start raising hell!  Let's see if we can de-throne Trans Union!

3 Contributions
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In my case, I have multiple credit cards but only carry a balance on 2 of them. I do this because I'm on a fixed income and I like the security of the other cards in case of an emergency like a car repair that nowadays can be in the thousands of dollars. Or a major appliance needing replaced etc. What ticks me off is that a person in my shoes who gets the credit and doesn't abuse it or max it out is penalized whenever I attempt to aquire new credit. I think that it's bulls#!t that every time a CC company checks my credit my credit score has to take a hit. And it can take up to 3 months for that hit to recover. And the crazy part is that I do get the card I applied for. The rules should be changed that if your score takes a hit every time you apply for a card, that hit should not happen if the person applying for the card is approoved and in fact gets the card applied for. Sorry, but this credit game is rigged. There shouldn't be 50+ different scoring methods out there. When you're dealing with a persons credit, it's a very, very important matter. It affects just about every aspect of their life, from owning a home, car, all consumer items, and even whether or not this person will get a good job. More and more emphasis is being put on credit responsibility. So there should be like 5 different methods of scoring instead of 50+ ways. And there shouldn't be 3 reporting agencies, there should be 1. Meaning 1 score, not 3 different scores that can differ by 100 points or more. It's a crap shoot every time we apply for credit what the result will be depending on which of the more than 50 methods employed the credit agencies the banks will use to determine our credit worthiness. I do realize that there's a cost for every negative thing we engage in throughout a person's life, but, there shouldn't be a cost whenever a person shows responsibility in any field of endeavor. And that includes ones credit.

Credit Karma Team
Top Contributor
2949 Contributions
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Helpful to 1 out of 1 people

Hi coryguy52,

Thanks for posting. We appreciate your insight. 

Reply by
cascadian12

7 Contributions
5 People Helped

I agree! If "credit" is so important, than "scores" should be provided by a non-profit organization or government agency, whose customer is "WE, the people," not the banks. Credit Karma could still make money by recommending credit cards and loans tailored to individual credit profiles.

1 Contribution
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Helpful to 1 out of 1 people

I think that the way the different credit agencies is totally unfair for the average person. I think they should all use the same exact things to figure out a person's credit score. The way it's done seems way too arbitrary. I also think that the whole system is rigged to strictly benefit the weathiest people at the expense of the rest of us. It's just one more way they rig the game against those of us who are not rich.

Credit Karma Team
Top Contributor
2949 Contributions
3945 People Helped

Thanks for posting.

4 Contributions
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Helpful to 47 out of 52 people

 <quote>This is because whenever u take on new debt your score usually drops at first and then as you make steady payments on it u get positive credit for not only making on time payments but for lowering this new debt.</quote>

Why doesn't the government put a stop on this absolutely idiotic thing called credit score? People that have no debt and only one credit card, will always have a bad credit score. Absolute bs.

The banks, car dealers and whoever prefer customers that carry an addional financial burden already.

An entire economy based on debt. If you have no debt, then you are simply non existant for banks and credit rating agencies. No wonder the rest of the world is laughing about the US.

Why can't we switch to keeping track of negatvie entries such as late payment, default etc. instead of punishing people that pay on time, carry no balance?

Reply by
Givesuhe11

2 Contributions
40 People Helped
Helpful to 10 out of 18 people

"No wonder the rest of the world is laughing about the US." 

Thanks to TranUnion, equifax, etc... And thanks to sites like credit karma inc...

Reply by
onthegrid

1 Contribution
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Helpful to 7 out of 8 people

Other countries have credit bureaus and credit cards too. Creditworthiness is determined based on history as well.

9 Contributions
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Helpful to 2 out of 2 people

Folks this is a FREE site.  Additionally, the site uses a DIFFERENT scoring mechanism than say, your FICO score.  Similarly, the FICO score mechanism is different than the Vantage score 3.0 used on this site (myFico.com site has a new mechanism called FICO Score 8...but you pay 19.95 each to get a score based on information from each credit bureau, i.e., TransUnion, Experian and Equifax...or around $58 if you order all three at the same time).  Additionally, the free annual credit report you get as required by federal law DO NOT give credit scores.  They only list the information that the credit agencies have in their respective databases regarding your credit history.

For example, under Credit Karma's scoring mechanism, my TransUnion score is 670...pretty low relative to my 698 Experian.  So I paid $19.95 at the myFico.com site and ran my TransUnion info through the Fico Score 8 mechanism.  Based on my info with TransUnion, my FICO score was 709, rated good by their standards.  HOWEVER, the reasons give why I have the score I do, whether using Credit Karma or the myFico.com website, WERE THE SAME.  Thus even though the range of the scores were different, that was related to the difference in probably the weights used by each scoreing model.  However, BOTH the info on Credit Karma and my FICO as to the reasons why I have a particular score were the same: short credit history, high credit utilization (28% of my available credit---paid $300 today so that will lower it to 12%), high debt rate on installment plan (student loans are a killer--over $3K in INTEREST ALONE in one year!!!!  So much for the PAYE plan...I make my required payments on time , but that sucker seems to grow exponentially). Pretty much what is said on here about improving your credit score was said on the myFICO score website....as they tried to push me into paying more cash for their products.

So why did I pay $19.95 for my FICO score?  Because it is still the number one scoring mechanism used by lenders (some may dispute me saying that, but oh well).  I wanted to know if a lender requested that info today what they would see.  Yes TransUnion, Equifax and Experian all provide their own scoring models and can give you a rating based upon that mechanism, but i's not a FICO score.

My suggestion (and its just that...mine) is that this site can be used as one of several methods for monitoring your credit score.  But the adage "you get what you pay for" does apply.  This is a free site supported by credit card companies to advertise their products (full disclosure, the myfico.com website does the same thing).  I noticed what credit cards Credit Karma recommended for me on their site was different from myfico.com.  Again, that is because of the different scores I received from each site.  If you are concerned about your FICO, Experian, Equifax and TransUnion paid sites are rating you, then pony up the cash and pay for your score based on their model.

Bottom line, Credit Karma provided me with info behind their rating that was THE SAME as the FICO website.  While a 670 and 709 is a wide range, both told me what I need to do: pay off those stupid student loans!!

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