Understanding Disparities in Credit Scores Across Bureaus
Recently, I decided to check my credit score with all three major credit bureaus: TransUnion, Equifax, and Experian. To my surprise, the scores were quite different: TransUnion gave me a 786, Equifax a 765, but Experian a 707. It's natural to wonder why there is such a disparity, especially since all three bureaus should report on the same credit information.
Differences in Scoring Models
The primary reason for these differences lies in the scoring models used by the bureaus. Each bureau may use different versions of the FICO score, such as FICO 8, FICO 9, or VantageScore. These different models can produce varying results even when using the same credit data. For example, VantageScore, while being more detailed, is not widely utilized outside the U.S., which accounts for the disparity with Experian's scores.
Data Differences Among Credit Bureaus
Another factor contributing to these disparities is the data differences among the credit bureaus. Not all creditors report to all three bureaus. If a lender chooses to report only to one or two of the bureaus, this can lead to differences in your credit history and consequently, your score. Additionally, the timing of updates to these reports can vary, with one bureau having more recent information than the others, which can result in different scores.
Impact of Credit Utilization and Other Factors
The algorithms used to calculate credit scores take into account various factors, including credit utilization, payment history, the length of your credit history, the types of credit you have, and recent credit inquiries. If any of these factors vary slightly between bureaus, it can affect your score. Even small differences in data can lead to significant differences in your credit score.
Checking for Accuracy and Inaccuracies
It's also important to consider that errors or inaccuracies in your credit report can contribute to these discrepancies. The best way to address this is by obtaining a detailed credit report from each bureau. This can help you identify any inaccuracies and dispute them if necessary. It's always a good idea to review your credit reports regularly to ensure everything is accurate.
Compensating Factors and Annual Credit Reports
According to the Credit Reporting and Scoring industry, under normal circumstances, the scores from TransUnion, Equifax, and Experian should fall in a predictable sequence: TransUnion (TU) scores are typically the highest, Experian (XP) scores are in the middle, and Equifax (EF) scores are usually the lowest. However, in this case, XP is showing the lowest score, indicating that there might be an issue with the information in their files.
It's important to remember that over 90% of consumer lending decisions are based on FICO scores, while VantageScores are less relevant for these decisions. Therefore, it's critical to obtain your detailed credit reports from each bureau. Under federal law, you are entitled to a free copy of your credit report from each of the three major credit bureaus once every 12 months. With the current situation of the COVID-19 pandemic, these reports are currently being offered every 7 days until April 20th, 2021.
Obtaining these reports and having them mailed to you is the best way to ensure you get a comprehensive view of your credit information. Avoid agreeing to receive them online, as it places you at risk of accessing a controlled version of your report with limited options for correction or dispute.
Once you have access to your reports, you can analyze the information reported by Experian and understand what is causing the atypical score order. Scores in the mid-700s typically indicate a well-maintained credit history. Feel free to reach out if you have any further questions after reviewing your credit reports.
Click here for more detailed guidance on credit report analysis and dispute procedures.