Ever wonder why your credit scores are so different?
You apply for an auto loan and your FICO score is 704 and a few weeks later you apply for a credit card and your score is 654.
One inquiry could not have possibly dropped your credit scores 50 points in just 2 weeks but, this is a real issue that a lot of people face on a daily basis.
So, let’s dig down into why your credit scores vary so much.
First off, the variation in credit scores is due to the fact that there are dozens of different credit scores with different score ranges.
There are 49 different FICO scores, some with a range of 300 – 850 and other industry-specific FICO scores which range from 250 – 900.
VantageScore v3.0 ranges from 300 – 850 but, VantageScore v2.0 ranges from 501-990.
The PlusScore ranges from 330 – 830 but, an Equifax Power Score ranges from 280 – 850, so depending on the type of scoring model that you’re looking at, the score will vary.
A 720 FICO Classic v5.0 score will place you in the “Good Score” range and mean that you should be able to get approved for some of the best rates and terms on loans but, a 720 VantageScore v2.0 puts you in the “Bad Score” range leading to high-interest sub-prime terms and interest rates.
On top of that, even scores that have the same ranges vary depending on the type of industry that is pulling your reports.
FICO scores for the mortgage industry give more weight and importance to previous mortgage loans, auto lenders have different FICO Scores (i.e. Auto Industry Option Score) which gives more weight and importance to previous auto loans.
If you apply for a credit card you will get a completely different score because the score that Credit Card companies use gives more weight and importance to previous credit card accounts, etc….
Finally, The Fair Isaac Company (FICO) gives lenders the ability to modify their scoring models so if Chase bank pulls a credit score using the same model that Citibank uses, you still might end up with a different score since Chase may have modified certain data points in the algorithm to adjust for their internal analytics of what constitutes a creditworthy consumer.
Ultimately, no 2 credit scores are going to be the same unless you’re having them pulled from the same credit bureau, via the same scoring model, from the same lender.
Now that we have all of that out of the way, let’s take a look at the most simple and obvious explanation of why your scores could vary.
That answer, of course, would be if you have your credit scores pulled from different credit bureaus.
The 3 credit reporting agencies (Experian, Equifax, and TransUnion) are 3 private companies which maintain 3 completely different credit files for each consumer.
Some credit furnishers don’t report to all three bureaus, instead, they may only report to one or two of the bureaus leading to different information reporting on your credit reports.
So, if your Experian credit file is reporting 13 inquiries, 6 collections and 2 charge-offs and your TransUnion credit file is reporting 4 inquiries, 1 collection, and 1 charge-off, you can understand why your scores may differ.
The different information would lead to different scores, it is not uncommon to see a 50 point discrepancy between scores reported by different credit bureaus.
So the next time you see a large variance in your credit scores, don’t be surprised. Instead, do your due diligence and find out what is causing the discrepancy.
And if you’re interested in improving your credit scores, CreditFirm.net is always here to help.