Why There Are Variations in Your Credit Score

Your credit score is a three-digit number that essentially grades the information in your credit report. It’s the number creditors and lenders use to decide whether to approve your application and at what interest rate.

Many people have wisely pulled their credit scores before applying for a loan only to find out the lender has a different, possibly lower credit score. Or, you may check your credit score across all three major bureaus and notice there are differences between them all. You can even check your credit score with the same bureau using two different credit scoring services and see big differences. There are basically two explanations for variations in your credit score: your credit report and the credit score calculation.

Credit Report Differences

The three major credit bureaus collect information (somewhat) independently, so your credit reports will vary from each other. Compare your three credit reports side-by-side and you’ll find information in one credit report that’s not in the others. The absence (or presence) of that information will make your credit score with that bureau different from the others. For example, if you have a charged-off account that only appears on one of your credit reports, you can expect a lower credit score from that bureau.

Also keep in mind that your credit report is constantly changing. It’s possible that new information has been added to or removed from your credit report between the time you pulled it and the time the lender pulled it (or you pull it again).

Credit Score Algorithm Differences

The second big reason that your credit scores vary is that there are dozens, possibly even hundreds, of credit score calculations. It’s quite possible that the credit score you checked was calculated on a slightly different model than the one your lender used. There are even several versions of the popular FICO score, which claims to be the score used by most lenders.

Note that while people often use FICO score and credit score interchangeably, they’re not always the same thing. FICO is a brand of credit score calculated and sold by the company FICO, formerly known as the Fair Isaac Company. All other credit scores are generic scores, affectionately known as FAKO scores. Plus, the credit scores you purchase over the internet are just educational scores, intended to give you an idea of where you stand. They’re not the scores that lenders actually use to make a decision about you. With that in mind, you shouldn’t be too shocked if the lender ends up with a different score than what you’ve checked.

If you believe that inaccurate information is adversely affecting your credit score, you can dispute that information with the credit bureaus that provided the report on which your score was calculated. You’re entitled to a free copy of that credit report within 60 days of being turned down, or you can order a free annual credit report through AnnualCreditReport.com. You’re also entitled to a free credit score whenever your credit score is the reason that you’re turned down for credit or approved but for less favorable terms than you were initially offered. You’ll get this free credit score automatically from the creditor or lender.