A reader wrote in asking about credit scores. She wanted to understand why the credit score she received from the credit bureaus was different than the score used by her bank. Here’s her question:
Q: I enjoy reading your blog. I have one question regarding the credit scores. I checked my credit scores with the three credit bureaus, and I was happy to see that my scores were all up well above 600 for each of the bureaus.
Then I went to my credit union. To my big surprise, the manager, after checking my scores based on their system, [said my credit] was well below what I saw with the bureaus.
She told me the credit score we as consumers see with the bureaus is always higher than what lenders such as credit unions and banks see. My question for you is — is this really true? If so, how can we, as consumers, get our real credit score before going to the lender?
A: So, what’s going on here? Several things. First of all, let’s think about credit scores generally. How are they calculated? You need two things to calculate a credit score: data and a credit scoring formula.
The Data Comes From the Credit Bureaus
These bureaus are TransUnion, Experian, and Equifax. Each bureau compiles data about your bill-paying habits, late payments, credit limits, credit utilization, inquiries, and more. To calculate a credit score, this data must be paired with a formula.
The most widely recognized formula comes from FICO. (There are a few competing formulas on the market, but FICO is still the most widely used by most lenders.) We need these two things to generate a credit score.
There are, however, a couple of problems we could encounter that can result in different credit scores. One is that the information in your credit file may vary from one credit bureau to the next. The data will be similar for the most part, but there will probably be some differences.
Why? Well, you may have a car loan or a bank loan that doesn’t report to all three credit bureaus. The creditor may only report to one or two of them. So one will have the information, but the others will not. One of your credit files may have errors, which is actually quite common. It’s not uncommon to check your credit file and find differences among the three major bureaus. So that’s part of what will result in different credit scores.
Tip: Use Experian Boost™ to track your real FICO Score.
There Are Multiple Credit Score Formulas at Play
The second reason, which is actually even more of a problem, is multiple credit scoring formulas are used. Even FICO, which you’ve probably encountered, has several different scoring formulas.
There are a couple of reasons for this. FICO is constantly tinkering with its credit scoring formula to get the most predictive tool possible. The goal is to get a formula that accurately predicts credit risk, and they’re constantly adjusting it to achieve that goal. Some lenders may choose to use the newest version of the formula, but others may continue to use older versions. (Remember, it usually costs lenders money to update their systems with the latest FICO formula.)
The second problem is that some lenders and industries have customized versions of the FICO formula. For instance, the FICO formula used on your credit file when you apply for a home loan might differ from the formula used for a credit card.
And there’s still one more problem. Lenders can customize their processes even more on their own. Some lenders take into account other information outside of your FICO score or even your credit file. Some develop their own formulas — or use a formula FICO didn’t develop. Others take into account other information they may have on you.
So even if we’re looking at the same data from the credit bureaus, there are still many formulas to generate a credit score. And this leads to each individual having a variety of possible credit scores. As a result, your lender may, in most cases, probably sees a credit score that’s different from what you may have obtained through one of the credit bureaus or even directly from FICO.
That’s the bad news.
The good news is that if you check your credit score through FICO, it will likely be reasonably close to what most lenders will see. I know “reasonably” and “most” are caveats here. You could wind up with a lender that doesn’t use the FICO Score or uses an older version of the formula.
As to the reader’s question, is it always the case that the score you get from FICO, Experian, Credit Karma, or other score providers is higher than the score a lender sees? Absolutely not. I actually know from personal experience in applying for mortgages that sometimes the score a lender receives is higher than what you get yourself. So your score could be higher or lower for a lender than it is for you. You just don’t know.
There are a few other things to consider. If you check your score in January and then apply for a loan in March, your scores could be different just because there’s more information in your credit file. When your score gets pulled in March, the lender is using the most up-to-date data from the credit bureaus.
Also, regardless of which formulas are used, you’ll take the same steps to improve your score. Paying your bills on time, keeping credit card balances low, and leaving older accounts open will help raise your score.
Ready to increase your score now? Experian Boost™ can help raise your FICO Score with every utility and mobile phone bill you pay on time. Until now, those payments did not positively impact your score. Start now for free.
Read More:
- Experian Boost Review
- Best Apps to Boost Your Credit Score
- How to Buy a Home With Imperfect Credit
Best Places To Find Your Credit Score
If you are in the market for a loan, the best place to find the score most likely to be used by lenders is directly from FICO. You can click here to be directed to the FICO website, where you can check out your FICO score.
Another option is to check out Credit Karma. I did a study based on my own credit scores to see how similar their (free!) scores were to the actual FICO Score I obtained when I applied for a mortgage. The scores were surprisingly close. Plus, these services can show you what’s helping your scores and what’s hurting your scores. Even if the number isn’t perfect, you can get an idea of what you’re doing right and what you could do better if you need to improve your credit score.
And if you’re in the market for a big purchase — like a home or a mortgage refinance — that information can be invaluable.
Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.
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FAQs
Which credit score is your real one? ›
If you are in the market for a loan, the best place to find the score most likely to be used by lenders is directly from FICO. You can click here to be directed to the FICO website, where you can check out your FICO score. Another option is to check out Credit Karma.
What app gives you your actual credit score? ›With myFICO, you can view and monitor your FICO Scores and credit reports right from your fingertips. You'll get alerts on your iOS device when changes are detected. Certain features are available only with eligible myFICO subscriptions. Learn more at www.myfico.com.
What credit score do lenders usually look at? ›Which credit score do lenders actually use? Most lenders use the FICO credit score when assessing your creditworthiness for a loan. According to FICO, 90% of the top lenders use FICO credit scores.
What website gives the most accurate credit score? ›Generally, Credit Karma is the overall best site in terms of getting free credit scores and free credit reports. It provides free weekly scores and reports from Transunion and Equifax that are available without having to provide your credit card first.
What is the best realistic credit score? ›- Exceptional Credit: 800 to 850.
- Very Good Credit: 740 to 799.
- Good Credit: 670 to 739.
- Fair Credit: 580 to 669.
- Poor Credit: Under 580.
You have the right to request one free copy of your credit report each year from each of the three major consumer reporting companies (Equifax, Experian and TransUnion) by visiting AnnualCreditReport.com.
Is your credit score on Credit Karma accurate? ›Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.
What is actual credit score? ›A credit score is a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports.
How many points is Credit Karma off? ›In some cases, as seen in an example below, Credit Karma may be off by 20 to 25 points.
Is Experian or Credit Karma more accurate? ›Experian vs. Credit Karma: Which is more accurate for your credit scores? You may be surprised to know that the simple answer is that both are accurate. Read on to find out what's different between the two companies, how they get your credit scores, and why you have more than one credit score to begin with.
Which credit score matters more TransUnion or Equifax? ›
No credit score from any one of the credit bureaus is more valuable or more accurate than another. It's possible that a lender may gravitate toward one score over another, but that doesn't necessarily mean that score is better.
Do banks use TransUnion or Equifax? ›In conclusion. Credit card issuers and lenders may use one or more of the three major credit bureaus—Experian, TransUnion and Equifax—to help determine your eligibility for new credit card accounts, loans and more.
Why is my Experian score so much higher than Credit Karma? ›This is mainly because of two reasons: For one, lenders may pull your credit from different credit bureaus, whether it is Experian, Equifax or TransUnion. Your score can then differ based on what bureau your credit report is pulled from since they don't all receive the same information about your credit accounts.
Which of the 3 credit scores is most important? ›FICO® Scores☉ are used by 90% of top lenders, but even so, there's no single credit score or scoring system that's most important. In a very real way, the score that matters most is the one used by the lender willing to offer you the best lending terms.
Is Experian the most accurate? ›Which credit report is most accurate? If you have a credit history that's been reported to the bureaus, you can have a credit report with each of the major bureaus. Those are TransUnion, Equifax and Experian. There isn't one “more accurate” report.
What is the average US credit score? ›Credit scores are three-digit numbers that show an important piece of your financial history. Credit scores help lenders decide whether to grant you credit. The average credit score in the United States is 698, based on VantageScore® data from February 2021. It's a myth that you only have one credit score.
What is a good credit score to buy a car? ›A good credit score — typically a score of 680 or higher — can help you secure a low interest rate from the dealer. In fact, taking your score from 600 to 780 could halve your rate. Lower monthly payments.
What is the most accurate free credit check? ›- Best Overall: AnnualCreditReport.com.
- Best for Credit Monitoring: Credit Karma.
- Best for Single Bureau Access: Credit Sesame.
- Easiest Sign-Up: NerdWallet.
- Best for Improving Credit: CreditWise.
- Best for Daily Updates: WalletHub.
Factors that contribute to a higher credit score include a history of on-time payments, low balances on your credit cards, a mix of different credit card and loan accounts, older credit accounts, and minimal inquiries for new credit.
How can I check my credit score without hitting it? ›- Get free credit reports directly from the credit bureaus. ...
- Use a free credit score app or website. ...
- Check if your bank or credit card provider already offers free credit score monitoring.
Why is my Experian score so much higher than TransUnion? ›
When the scores are significantly different across bureaus, it is likely the underlying data in the credit bureaus is different and thus driving that observed score difference.
Why is my FICO score 100 points lower than Credit Karma? ›The main reason why credit scores can vary is because they use different scoring models. A FICO® Score is calculated using a different formula than a VantageScore. And while most credit scores use a scale of 300 to 850, that isn't always the case.
What day of the month does your credit score update? ›Your credit reports are updated when lenders provide new information to the nationwide credit reporting agencies (Equifax, Experian, TransUnion) for your accounts. This usually happens once a month, or at least every 45 days. However, some lenders may update more frequently than this.
Can paying off collections raise your credit score? ›And if you have multiple debt collections on your credit report, paying off a single collections account may not significantly raise your credit scores. But if you have a recent debt collection and it's the only negative item on your credit report, paying it off could have a positive effect on your score.
What is the difference between a credit score and a FICO score? ›Credit scores can be thought of as a snapshot of credit reports and are used in lending decisions. And they're calculated by credit-scoring companies using different scoring models. A FICO score is a specific type of credit score—one calculated by credit-scoring company FICO.
What is a good TransUnion score? ›A good credit score from TransUnion, which is based on the VantageScore® 3.0 scoring model, is in the range of 721 – 780. If your credit score is below this range, consider 721 and above a good long-term goal.
Which score is more accurate FICO or Experian? ›Experian's advantage over FICO is that the information it provides is far more detailed and thorough than a simple number. A pair of borrowers could both have 700 FICO Scores but vastly different credit histories.
Which is better Equifax Experian or TransUnion? ›Of the three main credit bureaus (Equifax, Experian, and TransUnion), none is considered better than the others. A lender may rely on a report from one bureau or all three bureaus to make its decisions about approving your loan.
Why is my clear score better than Experian? ›Clearscore and Experian may show different credit scores due to their unique proprietary algorithms used to calculate your creditworthiness.
Which lenders use TransUnion only? ›- Avianca.
- Apple Card - Goldman Sachs Bank.
- Barclays.
- Capital One.
- Synchrony Bank.
- U.S Bank.
Who pulls Equifax only? ›
PenFed Credit Union is the only loan company that uses only your Equifax credit data. In most cases, you won't be able to determine beforehand which credit bureaus your lender will use. In some cases, lenders will pull your credit report from two or even all three major credit bureaus.
What FICO score is needed to buy a house? ›Credit score and mortgages
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable rate mortgages (ARMs).
Do car dealerships use Equifax or TransUnion? Car dealerships use a VantageScore or FICO score. The three credit bureaus — Equifax, TransUnion, and Experian — all provide both scores to auto dealerships.
Which credit score is most important Equifax or TransUnion? ›No credit score from any one of the credit bureaus is more valuable or more accurate than another. It's possible that a lender may gravitate toward one score over another, but that doesn't necessarily mean that score is better.
Which credit score is more accurate TransUnion or Equifax? ›Is Equifax more accurate than TransUnion? Scores from Equifax and TransUnion are equally accurate as they both use their own scoring systems. Both credit agencies provide accurate scores, and whichever your lender opts for will provide suitable information.
Is Experian or FICO more accurate? ›Experian's advantage over FICO is that the information it provides is far more detailed and thorough than a simple number. A pair of borrowers could both have 700 FICO Scores but vastly different credit histories.
Is Equifax stricter than TransUnion? ›Neither score is more or less accurate than the other; they're only being calculated from slightly differing sources. Your Equifax credit score is more likely to appear lower than your TransUnion one because of the reporting differences, but a “fair” score from TransUnion is typically “fair” across the board.
Do banks use Equifax or TransUnion? ›In conclusion. Credit card issuers and lenders may use one or more of the three major credit bureaus—Experian, TransUnion and Equifax—to help determine your eligibility for new credit card accounts, loans and more.
Why is Experian score higher than TransUnion and Equifax? ›When the scores are significantly different across bureaus, it is likely the underlying data in the credit bureaus is different and thus driving that observed score difference.
How accurate is the Credit Karma score? ›Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.
Which credit score is most accurate on Credit Karma? ›
Credit Karma compiles its own accurate VantageScore based on that information. Your Credit Karma score should be the same or close to your FICO score, which is what any prospective lender will probably check.
What is an excellent TransUnion score? ›A score of 661 – 720 is fair. And an excellent score is in the range of 781 – 850. Think of these rankings and ranges as guides, not hard-and-fast rules for what good credit is. Some people want to achieve a score of 850, the highest credit score possible.
Which credit score matters most? ›FICO® Scores☉ are used by 90% of top lenders, but even so, there's no single credit score or scoring system that's most important. In a very real way, the score that matters most is the one used by the lender willing to offer you the best lending terms.
What credit score is needed to buy a car? ›In general, you'll need a credit score of at least 600 to qualify for a traditional auto loan, but the minimum credit score required to finance a car loan varies by lender. If your credit score falls into the subprime category, you may need to look for a bad credit car loan.
Why is my Experian score so much higher than FICO? ›Why is my Experian credit score different from FICO? The credit scores you see when you check a service like Experian may differ from the FICO scores a lender sees when checking your credit. That's because the lender may be using a FICO score based on data from a different credit bureau.
Does Experian give you your real FICO score? ›While there are multiple credit scoring models, the FICO® Score☉ is one of the most commonly used by lenders and business to determine how reliable you will be in paying back a debt. You can get your FICO® Score for free from Experian.