Why Do I Have 3 Different Credit Scores?

I get this question from customers all the time. Mortgage lenders typically pull credit reports from the 3 main credit repositories: Transunion, Equifax, and Experian. All three of these repositories generate a credit score, which is a numerical representation of your credit history. While the exact formula for computing these scores is a trade secret, we know that your credit score is affected by your payment history, amount of credit available, amount of credit used, and any collections and/or judgments against you.

But why wouldn’t they all have the same score for the same borrower? There are
many reasons the scores may differ, but the main ones are:

1. Not all creditors and lenders report to all 3 credit repositories. So, the
   three repositories do not all have exactly the same information.
2. Creditors report to the repositories at different times. Your balance with ABC
   credit card may be different at the 3 repositories because one may not
   reflect the last payment or purchase you made on your account and another
   may. 
3. There are several different scoring models that are used. In fact, each
   repository uses different scoring models depending on the purpose of the
   score or the requirements of the creditor/lender. So, different models
   will analyze your credit data differently and give you a different score.  This is why most mortgage lenders pull credit reports from all 3 repositories and use the middle score. By using the middle score, lenders are attempting to get as accurate a credit profile as they can for their customers. 

What can I do to improve my credit score?

First, and most importantly, use credit wisely. Do not over extend yourself with
credit and always make your payments on time.

Second, the amount of credit you use should be as small a percentage of your
available credit as possible. For example, if you have $10,000 of available
credit, your score will be higher is you are only using $500 of that available
credit than if you are using $7,000 of it.

Third, make sure you know what is on your credit report. The Fair and Accurate
Credit Transaction Act of 2003 (FACTA) allows a consumer to request a copy of
their credit report, free of charge, from all 3 repositories annually. To learn
how to obtain your free credit report, and for other reasons to monitor your
credit, read my blog article, FREE Credit Reports.

For more information or help with your credit, please contact me at BarkerLoans@gmail.com or 708.473.7688.