If you’re thinking of getting a loan for a car or simply doing a checkup on your financial health, you’ve probably looked at your credit score. The internet is full of articles urging you to check your credit score at multiple credit reporting agencies. If you followed this advice, did you notice that your credit score wasn’t necessarily the same between each agency? It isn’t that credit score scales vary between agencies, it’s that there are a number of different factors that can impact your credit score at any given moment.
Why is my Credit Score Different When I Check it at Difference Credit Bureaus?
There are a couple of reasons your credit score may be different from one agency to the next. The simplest reason could be that you didn’t check your score at the same time at both agencies. Your credit score can change from week to week. If you’re checking your credit scores at multiple agencies at the same time, there are a few other reasons your score may be different.
- Different type of credit scores
- Formula variance between agencies
- Availability of information
You actually have a number of different credit scores. Each score is used for a different thing. For example, your FICO score is frequently considered to be a general credit score, though this isn’t actually the case. People typically refer to it as a general score because the things used to calculate it are general. If you were to apply for a car loan, a different credit score is used. The score that your lender will pull up focuses not only on your general credit history, but how it relates specifically to your financial history as it applies to cars.
You also may be seeing a different credit score between agencies because they sometimes use slightly different formulas to calculate your score. Your FICO score is calculated using a variety of methods. This is because a FICO score refers to a score generated by a company called Fair Isaac Corporation, who introduced the credit score in 1981. They actually produce a variety of credit specialized credit scores whose individual composition vary based on what they are used for, like the one for the car loan in the example above.
Another major reason for variance in your credit score between agencies is availability of information. Credit bureaus get the information they use to through a number of different sources, publically available information, purchasing it, receiving it from banks, etc. If there is a delay in information being sent out or one company finds something another misses, it’s possible that it will be reflected in a discrepancy between the two scores.
How is my Credit Score Calculated?
Now that you know why your credit score may change from bureau to bureau, and even from one week to the next, you’re probably wondering exactly how your credit score is calculated. In general, there are several things taken into account. Note that the weight given to each is unique and the percentages below are just an example.
- Bill payment history: 35% of score – This is a record of how prompt you’ve been with your bill payments. If you pay your bills on time every month this score will be higher than if you miss payments sometimes. The more frequently you miss payments, the greater the negative impact on this portion of your score. Public record of non-payment, like bankruptcy, can also impact your bill payment history.
- Level of debt: 30% of score – This refers not only to the total amount of money you owe, but also the percentage of your available credit that you’re utilizing. So, if you’ve got a substantial amount of credit you could be using, but the majority of it is free, your score will likely be higher than if you have a smaller amount of credit, but it is all being utilized. The relationship between your total credit and the credit you are using is called your credit utilization rate.
- Age of credit history: 15% of score – The age of your credit history takes into account how long you’ve had credit accounts. Generally, it takes into account things like the age of your oldest account and your newest account, and the average age of your accounts. The older your credit history, the higher this portion of your score will be.
- Types of credit: 10% of score – The different types of credit accounts, credit cards, mortgage loans, student loans, etc. Different accounts are given different weights based on the type of account it is.
- Number of credit inquires: 10% of score – It may seem a little counter intuitive that having more credit inquiries may reduce your score. After all, you may expect credit inquiries when you’re doing things like paying for a mortgage loan or a car loan. However, another time you’re likely to get a lot of credit inquiries is when you don’t have enough money to cover your expenses, which means you are more likely to miss loan payments.
Now that you see how your credit score is generated, it can help you avoid things that may lower it while doing things that raise it. There aren’t different credit score scales used by various credit reporting agencies, but they do sometimes use slightly different formulas to calculate your score. Your score will also vary based on things like, what type of credit you are applying for.