Why Are Credit Scores So Different?

When you think of a credit score, you probably think of it as something consistent, not something that differs depending on who is computing it. However, check out this question we received at Money Talks News:

How can this possibly be? I got my credit report and paid for my scores. TransUnion had my score at 700, Equifax at 691 and Experian had my score at 622. How can Experian get away with being 69 points off one and 78 points off on the other score? Thank you very much for your insight to this reader question.
– M

Actually, M, it’s worse than you think. Not only do the big three credit-reporting agencies have different scores, but there are actually dozens more variations floating around, most of which you’ll never see. In fact, you could have hundreds of scores.

That’s because Fair Isaac, the company that created the most widely used credit scoring formula — the FICO score — has many variations of the calculation. As you’ve discovered, different credit-reporting agencies reach different conclusions based on slight variations in the FICO formulas they use. There are also different scores for specific loan types.

Confusing? You bet. Here’s how The New York Times explained it several years ago:

So there are three versions of the basic score [at Equifax, Experian, and TransUnion], just for starters. But FICO also has several other versions, customized for the specific type of loan in question — say, an automobile loan, a mortgage or a credit card. Each is also offered by the credit bureaus, under their own brands. And each version may have multiple releases, as FICO’s formula for crunching the data is updated. So you can see how the versions pretty quickly add up to nearly fifty.

If it sounds unfair to pay for something that doesn’t offer a definitive conclusion, you’ll be happy to know that the Consumer Financial Protection Bureau agrees. The bureau released a report about the issue back in 2011, saying, “It is likely that the credit score that the consumer receives will not be the same score as that purchased and used by a lender to whom the consumer applies for a loan.”

The CFPB report raised other issues stemming from having dozens of score variations: What if a lender uses a different (nonFICO) scoring model than the one you paid for? What if the lender gets your score from a different credit bureau than you do?

“It is also possible that a consumer and a lender could access different reports from the [same credit reporting agency],” the CFPB says, “if they were to use different identifying information about the consumer.”

The imperfect solution

If life were fair, you’d be able to see your score for free, the same way you’re now able to see your credit history free at AnnualCreditReport.com. And that score would be the one all lenders see and would remain consistent among the credit-reporting agencies reporting it.

Instead, unless you’re aware of the places you can find a free credit score, you now pay about $20 to see just one credit score, and there are others you’ll never see. And as M has discovered, your score might vary radically depending on who reports it.

One company finds M an excellent credit risk while another judges M as marginal. What happens when M applies for a loan and a lender sees three different scores? One lender might average all three, another might use the middle one, and another might use the highest or lowest. And as I pointed out above, some lenders might use an entirely different model and ignore all three.

What’s a borrower to do? The best you can. While there may be dozens of different scores, there’s one thing that’s consistent: They’re all based on your credit history. And that’s something you have free access to once annually from each of the big three credit-reporting agencies. So, take a look at your credit history first, then read articles like “Boost Your Credit Score Fast With These 7 Moves” and “How I Got a Perfect 850 FICO Credit Score.”

And if you feel the current system is unfair, at least you can take comfort in the fact that you’re absolutely right.

Got a question you’d like answered?

I answer questions several times of week here at Money Talks News. You can ask a question simply by hitting “reply” to our email newsletter. If you’re not subscribed, fix that right now by clicking here.

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer for this week’s question? Share your knowledge and experiences on our Facebook page.

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
3 Ways to Get Paid for Searching the Web
3 Ways to Get Paid for Searching the Web

If you’re already doing it anyway, why not get rewarded for it? Here are three great opportunities.

11 ‘Disposable’ Items You Should Be Reusing
29 Purchases That Can Save You Money Every Day
29 Purchases That Can Save You Money Every Day

Sometimes, you’ve got to spend to save.

7 Deadly Health Mistakes People Make After Age 50
7 Deadly Health Mistakes People Make After Age 50

Simply avoiding these actions, or lack thereof, can improve the odds of a longer, more healthful life.

Beware These 5 Common Work-From-Home Scams
Beware These 5 Common Work-From-Home Scams

You can spot scammers and con artists with a little know-how.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

Why Your Next Stimulus Check Might Be Bigger Than You Expect
Why Your Next Stimulus Check Might Be Bigger Than You Expect

Your third coronavirus payment will be the biggest yet — and possibly even bigger than you realize.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

The 16 Cars Most Likely to Last 200,000 Miles
The 16 Cars Most Likely to Last 200,000 Miles

One automaker takes half the spots on a list of the longest-lasting vehicles.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.