Why Credit Scores Vary Between Reporting Bureaus

Remarkably, one three-digit number can either be your key to the kingdom, or the instrument of your banishment. In other words, the importance of your credit score to the nature of your life cannot be overstated.

Lenders, landlords, insurers and even some employers consider the data from credit scores to determine your creditworthiness. The higher your score, the more privileges you will be granted. And, the less you will be required to pay for those privileges when they involve financial transactions.

Given the significance of these numbers, it’s reasonable to ask why credit scores vary between reporting bureaus. After all, you’d think they’d be the same, since they’re all based on the same data — right?

Factors Determining Your Credit Score

The primary elements of your credit score are graded based on your payment history, credit utilization, credit history length, credit mix and new applications for credit. The former two carry the most weight, while the latter three play more of a supporting role.

Without question, the most consequential aspect of your credit report is your payment history. Accounting for 35 percent of your rating, even a single missed payment can drop your score significantly. The timeliness of those payments is considered as well.

Late payments — especially consistently late payments — will also have a detrimental effect on your rating. This is why it’s important to always pay on time and work out some plan to get your creditors made whole if you can’t — whether it’s negotiating some form of credit card debt relief or any other type of payment plan.

Utilization, accounting for 30 percent of your overall score, is determined by dividing the total amount of outstanding debt you have by the total of all of your credit limits. Anything over 30 percent is considered problematic and will reduce your score.  You have to be careful to maintain less than 30 percent utilization on your individual accounts as well.

The length of your credit history comprises 15 percent of your score, while your mix of credit accounts (charge cards, car loans, mortgages, credit cards and etc.) figures into 10 percent of your ranking. The number of times you’ve applied for new credit and the inquiries resulting from those applications account for the final 10 percent of your score.

It’s Not Always the Same Underlying Data

Experian, Equifax and TransUnion, the three largest consumer credit reporting firms, calculate your credit scores based upon the information above as aggregated from creditors, collection agencies and court records. However, there are instances in which all of these entities do not report to all three bureaus.

In other words, every agency may not have the same data.

You may have applied for credit under a different last name due to marriage or some other reason. While this usually doesn’t matter because Social Security numbers remain consistent, it can lead to fragmented reporting, which in turn can affect the overall score. Moreover, these discrepancies can sometimes result in one person’s activity being reported as part of another person’s history, which is why it’s so important to review your credit report at least once a year and ideally quarterly.

Another factor is the timing of the reports. Lenders provide data at varying intervals, so some information may be less than current at different agencies. Additionally, scores can change on a day-to-day basis. Always be sure the scores you’re reviewing were all pulled on the same date.

Understanding why credit scores vary between reporting bureaus underscores the importance of monitoring the documentation of all three credit agencies. Variances in their records can have a definite impact on how your creditworthiness is perceived.