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Why Your FICO Credit Score Differs Between Credit Scoring Agencies

Updated on February 21, 2015
Your credit report & score can vary
Your credit report & score can vary | Source

Introduction

We all have a FICO credit score, based on our credit history, but did you know that we have more than one FICO score? There are three main credit scoring agencies in the US: Experian, Equifax and TransUnion, and they all calculate your credit score in slightly different ways. Financial institutions then use the scores from one or more of these agencies to decide on whether to lend you money. In this article we'll explore:

  • What exactly is FICO?
  • How is a credit score calculated?
  • How do credit scoring agencies gather this information?
  • Why do credit scores differ between agencies?
  • What effect does your credit score have?
  • How can you find your FICO scores?

What exactly is FICO?

The word 'FICO' comes from the software that the credit scoring agencies use to create everyone's credit scores. The company that originally created the credit scoring system was called Fair, Isaac and Company after the names of the founders, Bill Fair and Earl Isaac.

Equifax were the first to use a FICO system, back in 1989, although all of the main credit scoring agencies now use a version of the software.

How is a credit score calculated?

Although there are dozens of individual factors that are used to calculate a credit score, almost all of them fall into six main areas:

  • Your payment history - Whether you make all of your repayments on time.
  • The amount of debt that you have - The ratio of the total amount of money that's available for you to borrow (your credit limit) versus how much debt you actually have.
  • Length of credit history - The length of time that an agency has a record of your credit history.
  • The different types of credit that you use - Whether you have different types of credit: this could include consumer (store) credit, credit cards, fixed-term loans, interest-free credit, a mortgage etc.
  • Recent credit searches - The number of inquiries that you have made for credit.
  • Other factors - This could include areas such as whether you have declared bankruptcy, if you have any garnishments or court orders against you and anything else that might have financial implications.

The areas that impact on your FICO credit score

How do credit scoring agencies gather this information?

Lenders provide detailed information on individuals and loans to the credit scoring agencies. They then consolidate and analyze this data to create a person's credit history and score. There's also publicly available information that can contribute towards credit scores.

There are several factors that go into calculating your credit score
There are several factors that go into calculating your credit score | Source

Why do credit scores differ between agencies?

Scores can differ because the exact importance that an agency places on each factor can vary slightly. For example, one agency might consider your credit limits to be more important, whilst another agency might be more interested in whether you make all of your repayments on time.

Although these factors can be weighted slightly differently, overall you will have a similar FICO score with each agency, although it is unlikely to be identical.

Don't stress your wallet, get your credit score under control
Don't stress your wallet, get your credit score under control | Source

What effect does my credit score have?

Lenders use your credit history and score to decide whether to lend you money and to determine interest rates and repayment terms. Each lender will normally get a FICO score and history from one of the three agencies and use that information to make their decisions.

Your credit score can have a significant effect on whether financial companies are willing to extend you loans or provide you with a credit card
Your credit score can have a significant effect on whether financial companies are willing to extend you loans or provide you with a credit card | Source

How can I find my FICO scores?

There are free trials available from the main credit scoring agencies. Simply visit their websites, search for 'Free FICO Score' and sign-up for a trial.

You can also use free websites like Credit Sesame and Credit Karma.

Repair your credit score

In closing

Understanding the various factors that make up your credit score and how your score can differ between agencies is a good first step in building a good credit history.

Budgeting properly, making repayments on time and not relying too much on credit will help to maintain and improve your credit score over the medium and long-term.

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    • Paul Maplesden profile image
      Author

      Paul Maplesden 2 years ago from Asheville, NC

      Matt, thanks for the kind words. I find it surprising that people don't know more about how credit scores are worked out, and why they differ so much. You make a very good point about contacting the credit agencies directly as well - I think that some people are nervous about speaking with them, whereas ultimately it benefits everyone that they have the latest data on your credit history.

    • Matt Easterbrook5 profile image

      Matthew A Easterbrook 2 years ago from Oregon

      You can also improve your credit score by paying off outstanding debt and writing a letter to all three showing the account has been paid in full. Great article you did a great job researching.

      Thanks,

      Matt Easterbrook

      (Author:Financial Revolution)

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