Big differences on Credit Scores?

Question

This angers me and I don't understand. Does Experian actually inflate your credit scores or is Transunion really a hard-***? My Experian score is 637 which puts me in the "Fair" bracket. But then my Equifax is 606 and Transunion is 598 (crap!) and both put me in the "poor" bracket.

I don't understand. I would think my scores would be relatively the same between the three.

Why the discrepencies in scores? Is one more "accurate" than the other? How would a potentinal landlord and employer evaluate these scores? Would they average them out?

Answer 1

Ever wonder why you can go online and be approved for credit within 60 seconds? Or get pre-qualified for a car without anyone even asking you how much money you make? Or why you get one interest rate on loans, while your neighbor gets another?

The answer is credit scoring.

Your credit score is a number generated by a mathematical algorithm -- a formula -- based on information in your credit report, compared to information on tens of millions of other people. The resulting number is a highly accurate prediction of how likely you are to pay your bills.

If it sounds arcane and unimportant, you couldn't be more wrong. Credit scores are used extensively, and if you've gotten a mortgage, a car loan, a credit card or auto insurance, the rate you received was directly related to your credit score. The higher the number, the better you look to lenders. People with the highest scores get the lowest interest rates.

Scoring categories
Lenders can use one of many different credit-scoring models to determine if you are creditworthy. Different models can produce different scores. However, lenders use some scoring models more than others. The FICO score is one such popular scoring method.

Its scale runs from 300 to 850. The vast majority of people will have scores between 600 and 800. A score of 720 or higher will get you the most favorable interest rates on a mortgage, according to data from Fair Isaac Corp., a California-based company that developed the first credit score as well as the FICO score.

Fair Isaac reports that the American public's credit scores break out along these lines:


Credit score Percentage
499 and below 2 percent
500-549 5 percent
550-599 8 percent
600-649 12 percent
650-699 15 percent
700-749 18 percent
750-799 27 percent
800 and above 13 percent

Currently, each of the three major credit bureaus uses their own version of the FICO scoring method -- Equifax has the BEACON score, Experian has the Experian/Fair Isaac Risk Model and TransUnion has the EMPIRICA score. The three versions can come up with varying scores because they use different algorithms. (Variance can also occur because of differences in data contained in different credit reports.)

That could change, depending on whether a new credit-scoring model catches on. It's called the VantageScore. Equifax, Experian and TransUnion collaborated on its development and will all use the same algorithm to compute the score. Consumers can order their VantageScores online at Experian's Web site for $6. Its scoring range runs from 501 to 990 with a corresponding letter grade from A to F. So, a score of 501 to 600 would receive an F, while a score of 901 to 990 would receive an A. Just like in school, A is the best grade you can get.

What's the big deal?
No matter which scoring model lenders use, it pays to have a great credit score. Your credit score affects whether you get credit or not, and how high your interest rate will be. A better score can lower your interest rate.

The difference in the interest rates offered to a person with a score of 520 and a person with a 720 score is 4.36 percentage points, according to Fair Isaac's Web site. On a $100,000, 30-year mortgage, that difference would cost more than $110,325 extra in interest charges, according to Bankrate.com's mortgage calculator. The difference in the monthly payment alone would be about $307.

Powerful little number
If you rented an apartment, got braces, bought cell phone service, applied for a job that involved handling a lot of money, or needed to get utilities connected, there's a good chance your score was pulled.

If you have an existing credit card, the issuer is likely to look at your credit score to decide whether to increase your credit line -- or charge you a higher interest rate, according to a credit scoring study by the Consumer Federation of America and the National Credit Reporting Association.

Answer 2

Equifax, Experian and TransUnion each have their own proprietary scoring models. If you are buying a home or car, 80%+ of all lenders will use scores based on the FICO model. It has been my Experience that the score received directly from the Experian and TransUnion may be 50 points off the FICO score your lender will be using. Equifax uses the FICO model and the score from their website will be pretty true the score you lender will see.

When qualifying for a mortgage, the lender will pull all three score and use the middle score as the score for your loan qualification. To get the most accurate score I would recommend visiting myfico.com where you can get score and complete credit reports from all three bureaus based on the FICO scoring model. Even with the FICO scores, you may see considerable difference between the three scores.

Creditors look at the score number only, employers and landlords will look at payment history to assess your character when deciding to hire you or rent to you. Smaller creditors and employers will sometimes look at TransUnion only.

To improve you score the best way to improve the score is to keep a lot of available credit on your credit cards and selectively apply for new credit; every time you apply for a loan you get an ‘Inqury’ which reduces your score. More than 4-5 a year will drive your score down.

Once you have your credit reports, start writing letters to the bureaus for each negative item. In you letter, say “this is not correct” or “this is not mine.” If they do not get to your request in 30 day, they have to remove the negative item by law. If you send the letters every 30 days as you receive the updated reports, you will be surprised at the improvement in your scores.

Answer 3

The fico and scores given by the credit bureaus are the same thing. How FICO Scores Work When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you. FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus – Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well. Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders

Answer 4

Technically your credit score is 606. Most lenders look at the middle of the 3 scores. The reason there is a fluctutation is because all 3 reprot differently. Something that is on one report might not be on the other. 30-40 pts is a fairly average range of scores.

Answer 5

Well, each company reports to different credit bureaus. Some report to all three, some report to just one or two. Landlords that evaluate your score use their own scoring system - NOT the one that's on your credit report. Each company that issues you credit or services use their own scoring system. They also have their own guidelines and requirements that you as the consumer must posess on your credit report for that company to approve you. You might find out about any credit classes you can take that will educate you on your credit report, and what everything means. In Texas, I took a course that is offered by the Credit Coalition. Maybe do a google search for that or Covenant Community - those are really good companies that offer credit classes at no cost. I just finished taking it.

Answer 6

usually it's because a creditor doesn't report to all three. many report to just one. It's up to you to get copies of your reports, if you find wrong entries, dispute them in writing one at a time. Then request that the one that shows your better credit report the better accounts to the others. But, be wary that by doing so, the poorer accounts on the others will also be sent to the "better" one, thus lowering your score there too. Also, request in writing or at their website, for each bureau, that they do not allow random credit checks by the companies that send you "pre qualified" cards etc. Each time they check your credit, it lowers your score from 1 to 5 points.

Answer 7

Each of the bureaus use a different model to determine your score. There will always be differences.

For mortgage lending purposes the middle of the three scores is used.

Answer 8

I'm interested in this

Answer 9

It depends..