A credit score is a three-digit number that lenders use to determine whether you’ll get approved for financial products like credit cards and loans.
Credit scores typically range from 300 to 850, but there are dozens of versions — from base scores to industry-specific scores — that make it tricky to know which one you're being evaluated on during the application process.
You may check your score with your credit card company or on a personal finance site only to find it differs on another, making it hard to know what credit score range you fall in and which products you have the best chance of qualifying for. And when a lender pulls your credit score, they may request it from a differentcredit bureau— Experian, Equifax or TransUnion — and/or request a specific version that varies from the one you checked.
Most credit scores weigh the same factors, such as payment history, utilization rate, length of credit history, number of new inquiries and variety of credit products.However, there may be score differences for a variety of reasons, which CNBC Select breaks down below.
6 reasons why your credit score differs
- Credit scoring model used:There are several models out there for scoring your credit history. But typically, lenders use one of the two main credit scoring models — FICO or VantageScore.Both companies evaluate the same main factors of your credit history like payment history and utilization rate, but use their own formulas to weigh each factor.
- Score version: There are dozens of credit score versions that are broken up into base scores and industry-specific scores. Base scores, such as FICO® Score 8 or VantageScore 3.0, show lenders the likelihood you’ll repay any credit obligation. Industry-specific scores represent the odds you’ll repay a specific loan, such as the FICO® Auto Score 9 used in auto loan decisions.
- Credit bureau: Credit scores are calculated using data listed on your credit report, which comes from one of the three major credit bureaus — Experian, Equifax or TransUnion. Your score differs based on the information provided to each bureau, explained more next.
- Information provided to the credit bureaus: The credit bureausmay not receive all of the same information about your credit accounts. Surprisingly, lenders aren’t required to report to all or any of the three bureaus.While most do, there's no guarantee that the information will be the same across the board, creating potential differences in your scores.
- Date scores are accessed: If you view your credit score at different times, there may be discrepancies since one score may be outdated.
- Errors on your credit report: Your credit score can reflect any errors that appear on your credit report. If errors only appear on one bureau'sreport, then your credit score from that report may differ from another that has no errors. You should dispute errors on your credit report right away to avoid harm to your credit score.
Which credit score matters the most?
While there's no exact answer to whichcredit score matters most, lenders have a clear favorite: FICO® Scores are used in over 90% of lending decisions.
While that can help you narrow down which credit score to check, you'll still have to consider the reason why you're checking your credit score. If you're accessing your credit score simply to track your finances, a widely-used base score like FICO® Score 8 works. This version is also helpful for gauging which credit cards you qualify for.
If you plan to make a specific purchase, you may want to review an industry-specific credit score. FICO lists the specific scores that are used for various financial products. FICO® Auto Scores are ideal if you want to finance a car with an auto loan, while it's good to check FICO® Scores 2, 5 and 4 if you plan to buy a house.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
As an expert in personal finance and credit scoring, I have a deep understanding of the intricacies involved in determining one's creditworthiness. Over the years, I have closely followed developments in credit scoring models, industry-specific scores, and the factors that influence credit scores. My expertise is grounded in both theoretical knowledge and practical experience, having helped individuals navigate the complex landscape of credit and financial products.
Now, let's delve into the key concepts discussed in the article:
Credit Score Basics:
A credit score is a three-digit number used by lenders to assess the likelihood of a borrower repaying financial products like credit cards and loans. The scores typically range from 300 to 850.
Credit Score Models:
- FICO and VantageScore: The two main credit scoring models, FICO and VantageScore, evaluate essential factors like payment history and utilization rate. However, they use their own formulas to weigh these factors, leading to variations in scores.
Score Versions:
- Base Scores and Industry-Specific Scores: Credit scores come in various versions, including base scores (e.g., FICO Score 8, VantageScore 3.0) and industry-specific scores (e.g., FICO Auto Score 9). Base scores indicate general creditworthiness, while industry-specific scores assess the likelihood of repaying a particular loan.
Credit Bureaus:
- Experian, Equifax, and TransUnion: Credit scores are calculated using data from credit reports provided by these major credit bureaus. Variations may occur based on the information reported to each bureau.
Information Discrepancies:
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Data Provided to Bureaus: Lenders may not report the same information to all three credit bureaus. This discrepancy can lead to differences in credit scores.
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Date Scores are Accessed: Checking your credit score at different times may yield discrepancies as scores can become outdated.
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Errors on Credit Report: Inaccuracies on credit reports can impact credit scores. Disputing and correcting errors promptly is crucial to maintaining an accurate credit profile.
Which Credit Score Matters Most:
- FICO Scores: Over 90% of lending decisions use FICO Scores. However, the importance of a specific score depends on the purpose (e.g., general tracking, specific purchase). Industry-specific scores, such as FICO Auto Scores, are relevant for particular financial products.
In conclusion, understanding the nuances of credit scoring models, score versions, and the factors influencing credit scores is crucial for making informed financial decisions. Whether monitoring your general creditworthiness or preparing for a specific purchase, being aware of the intricacies can empower you to navigate the credit landscape effectively.
