What Are the Differences Between the Credit Reporting Agencies?

It can be disheartening to discover the 750 credit score you have at one agency is 640 at another. Especially frustrating is a situation where your lender just happens to request information from the agency where your score is the lowest. Although it may seem unfair, this happens because while all three credit reporting agencies have the same goal, each achieve this goal in a different way.

Access to Information

One difference among credit reporting agencies is the information they obtain and use to compile your credit report and calculate your credit score. Although each agency works with the same type of information, including personal information, credit history and payment activity, they do not all work with same amount. Instead, Equifax, Experian and TransUnion, the three major agencies, rely on information your creditors provide. However, creditors do not have a requirement to provide information to all three agencies and as competitors, there is no information sharing system in place. As a result, the information each works with may be similar but not always the same.

Scoring Model

Another difference among credit reporting agencies is the scoring model each uses to calculate your credit score. Although the Fair Isaac Corp., or FICO, model most often forms the basis of each agency's scoring system, individual agencies adopt their own versions. For example, Experian uses the Experian/Fair Isaac Risk Model, Equifax has the Beacon model and TransUnion uses the Empirica model. Each comes from the FICO model and uses similar criteria but weighs criteria differently. In addition, each has the option to create and use a model specific to the agency. Although credit reporting agencies do not publish specific scoring model methods, you can get a general idea of the weight given to individual criteria by examining the FICO model. Credit score assessment, according to the FICO method, generally breaks down as follows: payment history about 35 percent, total debt load about 30 percent, length of your credit history about 15 percent, amount of new credit about 10 percent and all other factors, such as the mix of credit types, is about 10 percent.

Considerations

When you apply for a credit card or an installment purchase loan, the differences among credit reporting agencies may or may not work to your advantage. If your lender pulls a report from only one agency, the scores he sees is part of what he will base approval decisions on. In the case of a mortgage loan, however, lenders usually view reports from all three agencies.

Tips

Credit reporting agencies are information receivers, not information verifiers. With so much riding on the strength of your credit score, small differences among credit reporting agencies and the potential for inaccurate information can mean a lot. If you are at a cutoff point, this can mean paying a higher interest rate, receiving a lower credit limit or facing the possibility of rejection. While differences among credit reporting agencies mean your credit will never be the same across the board, you can take steps to close the difference by making sure the information they contain is up to date and accurate. Request and review a copy of your credit file, from all three agencies, once every 12 months through AnnualCreditReport.com. Follow the instructions each provides to remove old or inaccurate information (See Resources).