Why Credit Scores are Different?

If you are in the process of either working to better your credit standing or to otherwise prepare to make application for a loan, you likely have started to consider your credit reports. In this regard, you likely have noticed some variations between your credit score from one credit reporting agency to another.

In reviewing your credit reports, you may have come to wonder how it can be possible for you to have different credit scores -- when you only have one credit history. Through this article, you will be presented with some basic information about how and why you can have different credit scores at each of the three major credit reporting agencies.

In advance of this discussion, however, it is important for you to have a it of background information, so that you can put your credit score into a bit of perspective.

Understanding How Your Credit Score is Devised

The three major credit reporting agencies desired a more uniform means of dealing with credit histories. The FICO scoring method was created in the 1980s by the Fair Issac and Company. The FICO credit scoring system uses a numerical grading scale to provide an evaluation of a person’s credit history or credit past. The credit score or FICO scoring system uses a numerical range from 300 and 850, the higher the number the better the credit history. The FICO credit score regimen takes into account a number of different and important factors including a person’s payment history, current unpaid debt, how long you have had credit, number of credit inquiries, and types of credit you’ve had.

A Look at the Three Major Credit Reporting Agencies

As mentioned above, there are three major credit reporting agencies in operation today that make use of a credit score and credit scoring or FICO scoring system. These are: Equifax, Experian, and TransUnion. Each of these agencies independently evaluates your credit history in the process of determining your credit score -- there is no common clearinghouse through which your credit score is determined

Variations in the Computation of Your Credit Score from Agency to Agency

Each of the different credit reporting agencies employs its own set of standards when it comes to computing and developing a consumer’s credit score. While each credit reporting agency uses the same FICO credit scoring system at this point in time, the do weigh and balance different aspects of a consumer’s credit history … differently. Therefore, in the end, there will necessarily be some differences in the credit score produced by one agency or another.

Variations within a Consumer’s Credit History from Agency to Agency

Another factor that will result in differences in credit scores from one credit reporting agency to another rests in the fact that there can be (and usually are) some differences in the items that are included within a person’s credit history from agency to agency. Because the base information can vary from one credit reporting agency to another, there necessarily will be differences in the resulting credit score from agency to agency.