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.

 

You have more than one credit score. In fact, you probably have dozens. [Tweet this]

 

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? Use this form to report it to our editorial team. 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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2 Contributions
9 People Helped

Helpful to 3 out of 4 people

This whole issue of credit scores is baffling.  My credit union just ran my score and it was 702 from TransUnion and yet it says 756 on CK, which is supposedly TransUnion.  My FICO score was 759, and Experian 726.   I ran these scores over the weekend on MyFico and Credit Sesame.  I don't understand why there would be such a huge disparity in scores.  It's frustrating because I'm trying to get a car loan and the best interest rate I could get was 5.95.

5 Contributions
1633 People Helped

Helpful to 4 out of 5 people

About 8 months ago all I was using was a debit card , my score was low. I got a free trial Visa credit, (no intrest for 12 mo.) , card  from my bank WELLS FARGO for $3,000. I started using it for all my purchases each month, I paid (auto bill pay) min. pmt on time. I also  paid 90 to 95% of amount used each month. I was showing using credit and keeping low but not zero balance. My average scores have gone from 595  to 772  and climbing.  The only reason I was able to get the WF car was it had been my bank ever since it took over WACHOVIA and I had $1000 in my savings.                                                                                                                                        

4 Contributions
8 People Helped

Helpful to 3 out of 4 people

Need advice...My credit score is in the 570's. My score dropped 32 pts since June. I was late in the past on credit cards.  I dont use credit cards at all now.  I only owe on my house.  No car payments, credit cards, etc.  How can I get my credit score up?  I can't get approved for anything.  Thank you!

Reply by
stillwaiting2c

6 Contributions
21 People Helped
Helpful to 4 out of 4 people

From my experience, having NO credit is as bad as having bad credit.  Open a revolving charge with someone (I used Fingerhut and Amazon) and buy something that you make payments on (appliances, furniture) and then be sure to make the required payments on time for at least 6 months.  Only charge small amounts that can be paid off in 6 months or less.  You need to establish some kind of record that shows you can make payments on an account on a regular and timely basis in order to show you are a good credit risk.

4 Contributions
15 People Helped

Helpful to 3 out of 3 people

I just pay my bill son time and sometimes, before they are due. Check yourt credit report(s) for inaccurate information. If found, write the credit bureau and ask them to honor the law and remoe the inaccurate data. I presently have a 784 credit score. I do nor understand why my score fluctuates. when I pay off credit and make payments ahead of time. I think my score should be 900+

1 Contribution
3 People Helped

Helpful to 3 out of 3 people

 None of the scores the average consumer have access to are what lenders use.  I monitor my credit through USAA, and those scores always differ greatly from the scores on the credit report my mortgage lender pulls.  Yes, I've had him pull it a few times while trying to bump my score.

1 Contribution
341 People Helped

What is the range on Credit Karma scores?

Helpful to 341 out of 394 people

Please elaborate on the range of the Credit Karma scores.

Thanks!

Reply by
JustinTW

8 Contributions
48 People Helped
Helpful to 12 out of 13 people

CreditKarma uses the TransUnion report to create a score based off of the TransRisk model. The reason your scores may differ from Experian to TransUnion is because both use different models.

Another possible factor is that a company you have a line of credit (whether revolving or installment) through does not report to TransUnion or Experian, which caused one score to be lower or higher than the other.

Last, TransUnion's model accounts for 550 possible "points" where Experian's only counts for 500, so your score may be "expanded" through TransUnion's, causing it to appear less than it really is.

The only true way to know why one is less than the other is to know both of their models. I would recommend getting two free credit reports (one from Experian and one from TransUnion) and comparing them.

Reply by
bluejaybluebirds

1 Contribution
4 People Helped
Helpful to 4 out of 4 people

thanks for the info with transunion on the vantage score,appreciate that insight.

Reply by
g81630

3 Contributions
43 People Helped
Helpful to 39 out of 45 people

I paid off one car loan and my score went down 48 points..why and such a big change?  Shouldn't it a progress toward and much high point?  Karma note indicated that loss of point was due to my closing my account?  Why is that? Car Loans are not credit card loans...

Reply by
hanaleikanai

5 Contributions
27 People Helped
Helpful to 4 out of 4 people

It's such a bunch of crock.  They took off 10 points because I am not taking their advice on car insurance?  That is so bogus.  Crazy DM

Reply by
bakinn

1 Contribution
0 People Helped

Me too! What the hell??

Reply by
sdougteach

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

Omg. this just happened to me too. I paid off my car loan six months early and took a 30 point hit.I am so annoyed as I had made an 80 point jump in the past 6 months in preparation to make a home purchase in 2013!!!

Reply by
bear768

6 Contributions
8 People Helped
Helpful to 1 out of 1 people

it gives you somthing to measure against if you trying to grow youre credit you want to keep what you owe  below 50% keep youre payment on time learn all you need to know about how credit works  be carecareful on who pulls you're credit you lose points everytime youre goal is TO GROW  credit  

Reply by
nikkiwilcan

1 Contribution
0 People Helped

WOW! Would love to hear how you made that 80 point jump.

Reply by
torbuktu

1 Contribution
0 People Helped

Makes sense .

Reply by
BrianB76

1 Contribution
0 People Helped

I notice a couple balances going down but my score is not,,I don't understand why

Reply by
Rowrow123

1 Contribution
0 People Helped

great information. thanks

Reply by
picacoo

1 Contribution
0 People Helped

Very helpful. thank you. 

Reply by
David7135

1 Contribution
0 People Helped

What is the best credit score from Karma credit?

Top Contributor
117 Contributions
838 People Helped

Helpful to 16 out of 19 people

What people need to realize is that each individual company, such as Credit Karma, Credit Check Total, Free Credit Report . Com, and also, each of the individual reporting agencies: Experian, Equifax & Trans Union, ALL use their own and very different scoring formula, or algorithm.  Even if all your reports are exactly the same (which is highly unlikely) those different formulas will give you different scores all over the place.

Even the FICO scores for one agency can differ, depending if it is a credit card pull, a mortgage pull or an automobile loan pull.

The best way to get the highest score possible is to focus on the content of the reports.  Great reports beget great FICO scores.  Period.

1 Contribution
8 People Helped

Helpful to 8 out of 15 people

I wish people would learn how to spell and use proper grammar when spewing all their useless thoughts across the Internet! 

3 Contributions
13 People Helped

Helpful to 1 out of 1 people

I asked for an insurance quote by one of the places that you reccomended on here (MetLife), not only was the quote 3x what I am paying now, it dropped my insurance rating by 33 points!  I was very upset about this. Can you please explain this to me?

2 Contributions
6 People Helped

Helpful to 1 out of 1 people

How can I find out what accounts I owe? When I look on my report it says I owe 0, but then it says $16000. I don't understand where this is coming from.

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