You’re one person and you have one credit history. So shouldn’t you have just one score? And if you have multiple scores (which you probably do), why in the world would they show different numbers? Here’s how, but first, some background.
What are credit scores, exactly?
Credit scores are rated on a scale, 300-850 being a common one. It’s almost always the case that the higher the number, the better. But what does “better” mean? In general terms, credit scores measure the likelihood you will fail to pay your loans back. These loans can be for lots of things: credit cards, mortgages and auto loans, to name a few.
So taking the 300-850 range as an example, and holding everything else equal, a score of 830 is meant to indicate that the credit applicant is more likely to pay back their loans than is someone with, say, a 520.
How are scores calculated?
Credit scores need credit data. They need something upon which to base their calculations. Most credit scores use data compiled by one, two, or all three national credit bureaus—TransUnion, Experian and Equifax. A person’s credit report is a list of the data the bureau producing that report has compiled for that person.
Each of the three national credit bureaus is a separate company
TransUnion, Experian and Equifax are three separate companies, each with its own data, report, scoring products and the like. Each creditor you have—credit card companies, the company to which you owe mortgage payments, the company that finances your new car, to name a few examples—is free to choose whether they’d like to report data to the bureaus, and if so, what data to report. What’s more, they can choose to report to one, two or all 3 national credit bureaus. All this means that the data collected by TransUnion, for example, may not be the same data collected by Equifax.
An example: different credit bureau scores
Let’s say you have a 750 TransUnion Credit Score, but an 800 Experian Credit Score. One reason for the difference might be that TransUnion bases its credit score on your TransUnion Credit Report, but Experian bases theirs on your Experian Credit Report.
To continue with this example, let’s say a negative item—like a late credit card payment—was reported to TransUnion, but not to Experian. As mentioned above, one of the reasons this could happen is this fictitious credit card company chooses to report credit data only to TransUnion.
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Okay, so I might have different credit scores, but what might that mean for me?
As you can see, it’s completely normal for one person to have different credit scores. The above example is just one, small reason why that could happen. Other reasons may include: different credit scoring models (one may weigh certain data more heavily or lightly than another) and specialized credit scores (there are certain scores geared toward mortgage decisions, for example).
One of the most important things you can do is stay on top of your credit. Make sure you’re regularly checking your credit reports for the 3 national credit bureaus. If everything in those reports looks as it should, credit scores using that data should give a fair credit rating.
Even though we’ve written this entire blog post about it, don’t worry too much about different scores. If a negative credit decision was based upon a certain credit score, the creditor is usually required to show the score or scores they based their decision upon. Then you can investigate further.
Bottom line, you can’t control which score or scores a creditor might use. But you can control your credit health by being responsible with your credit habits. And regularly checking your credit reports helps ensure you’re in the know about changes to the data credit scores typically use.