What is the difference between Experian and Equifax and which one might be better for you? Read more to find out.
Experian and Equifax are two leading credit reporting agencies in Australia. They are responsible for collecting credit information, calculating credit scores, and providing credit reports to lenders to help them assess the creditworthiness of potential borrowers.
But how do the credit scores from Experian and Equifax vary, and how are these scores calculated? Here’s what you need to know about them:
What is Experian?
Experian is one of the world’s leading credit reporting bodies. It started its operations in Australia in 2013.
As an Australian credit bureau, it allows lenders, credit card providers and financial institutions to check the Experian credit score and Experian credit report to help lenders better understand the credit risk of their borrowers.
How does Experian calculate credit score?
While multiple credit scoring models are available, Experian uses a proprietary formula to calculate the credit score based on your current credit information.
Even though the exact formula used for calculation is not shared publicly, Experian does share the factors that impact your score.
- Payment history: This accounts for 35% of your score. Late or missed payments can adversely affect your score.
- Credit utilisation: The amount of debt you have incurred to how much is available to you, also known as the credit utilisation ratio, accounts for 30% of your score.
- Credit history: The average age of your current accounts and how long you’ve used credit products account for 15% of the score.
- New credit incurred: The number of new credit accounts you have accounts for 10% of your score. This includes the number of accounts you have opened recently and the number of hard enquiries have been made in your credit report. Too many hard enquiries can lower your credit score.
- Credit mix: The different types of credit in your portfolio accounts for 10% of the score. If you only have one type of credit product, say retail credit cards, your score may significantly be lower than having a better credit mix with credit cards and instalment loans.
What is Equifax?
Similar to Experian, Equifax is also a multinational credit reporting agency. It is Australia’s largest consumer credit reporting agency.
It collects credit information reported by financial institutions and calculates your Equifax credit score accordingly. The information is presented to banks and other credit providers through the Equifax credit report to help them assess the creditworthiness of potential borrowers.
How does Equifax calculate credit score?
According to Equifax, here are the key factors that impact a score:
- Payment history: Whether or not you have repaid your dues in the past is an essential factor for determining your credit score. The credit scoring model considers how late your payments are, how much was owed, and how often you paid past your due dates.
- The types of accounts: Whether you have revolving debt such as credit cards or instalment loans such as mortgages, home equity loans, student loans, and personal loans, or a mix of both will also impact your score.
- Credit utilisation: It is the percentage of the total credit you are using, against the total credit limit you have. It is considered the second most important factor for your credit score. Ideally, your credit usage should at least be 30% lower than your given credit limit.
- Credit history length: It defines your ability to repay off debts in a timely and responsible manner.
Experian vs. Equifax: The key differences
When it comes to Experian vs Equifax, here’s what stands out:
Calculating the score
One of the key differences is how these credit rating agencies calculate your score. At Equifax, your score is on a scale of 0 to 1200, whereas Experian calculates it on a scale of 0 to 1000. Of course, the algorithms they use for calculating the score are also different. As a result, you may notice a difference in your score across these bureaus.
For instance, you need to have a minimum score of 625 to be considered a good score on the Experian scale. However, you’d need a minimum of 670 to be considered a good score on the Equifax scale.
Information collected
The source of information of these agencies is another critical difference. Credit providers don’t need to report their customer’s credit information to all the bureaus. If you have borrowed an instalment loan from lender A who reports only to Equifax, and a credit card from lender B, who reports only to Experian, your credit scores may differ for the same credit history.
Credit report formats
The way credit reports are presented also varies between Equifax vs Experian.
Equifax breaks down the credit report into various sections, such as revolving accounts, mortgages, consumer statements, and instalment loans. It also classifies various accounts as open or closed to provide a simplified summary of old and new credit information.
On the other hand, the Experian report has three key sections: personal information, accounts, and inquiries. Additionally, Experian also breaks down every account’s monthly data, including the minimum payment due, payment made, and balances.
Why is my credit score different between Experian and Equifax?
The differences between Experian credit score vs Equifax credit score are due to the different algorithms used by them. The exact credit scoring formula employed by either is not publicly available.
As per the information on their websites, the general factors taken into account by Experian and Equifax for calculating the credit score are not identical:
Experian | Equifax |
|---|---|
The total amount of outstanding debt | Payment history |
Number of late payments | Type of accounts |
Type of accounts | credit utilisation |
Length of accounts | Credit history length |
Moreover, Experian and Equifax follow different scoring scales.
Since the Experian scale is till 1000 while the Equifax scale is till 1200 -- there is an overall difference of 200 points.
The time frame of considering the credit information also varies between Equifax and Experian. While one may take into account the most recent data, the other may consider data from several weeks ago. As a result, each credit rating agency works with unique credit information while calculating the score, which may explain the difference.
Lastly, while it is not possible to list out which lenders use Experian only in Australia or who uses Experian for credit checks in Australia, the majority of credit providers report to Equifax in accordance with the Credit Reporting Code. But there is no definite list as it can keep changing.
Is Equifax or Experian better?
The better option between Experian vs Equifax in Australia depends on your needs. Both of these agencies provide comprehensive credit reporting solutions. If needed, you can ask the credit provider which credit rating agency’s report they consider when evaluating loan applications so that you can look at the appropriate one.
However, remember that lenders also have their own credit scoring models based on an applicant’s credit history. Therefore, the same credit score from Equifax and Experian may be interpreted differently by the lenders.
Which credit report is most accurate?
There’s no clear answer to which credit report between Experian vs Equifax in Australia is a better option. As stated above, not every lender reports to both agencies. As a result, the information in the credit report is not the same.
And having different information in different reports is absolutely fine as long as the information has been recorded accurately. You need to review your credit report closely to identify erroneous information, such as incorrect loan details or loan enquiries that were actually never made. Reporting any inaccurate information on time can help you improve your score automatically.
Final words
To sum up, other than credit cards for bad credit, performing credit checks are an integral part of evaluating any credit application. Lenders may consider reports from one of the credit rating agencies such as Experian or Equifax to determine your creditworthiness.
Make sure to keep a close eye on your score from both the agencies so that you know whether you meet the minimum qualification criteria when you apply for any product.
Wondering how to check your credit score? With ClearScore, you can get both your Experian and illion credit reports and scores for free.
As an enthusiast with a deep understanding of credit reporting agencies and their scoring systems, I can confidently shed light on the differences between Experian and Equifax in Australia. My expertise is grounded in a comprehensive knowledge of credit scoring models, algorithms, and the factors influencing credit scores.
Firstly, Experian and Equifax are prominent credit reporting agencies in Australia, playing a crucial role in collecting credit information, calculating credit scores, and providing credit reports to lenders for assessing the creditworthiness of potential borrowers.
Experian, established in Australia in 2013, utilizes a proprietary formula for calculating credit scores. The factors influencing Experian credit scores include payment history (35%), credit utilization (30%), credit history (15%), new credit incurred (10%), and credit mix (10%). Each factor contributes differently to the overall score, with late payments and high credit utilization negatively impacting the score.
Equifax, Australia's largest consumer credit reporting agency, considers factors such as payment history, types of accounts, credit utilization, and credit history length in its credit score calculation. Equifax employs a scale of 0 to 1200 for credit scores, with specific emphasis on timely payments and responsible debt management.
Distinguishing factors between Experian and Equifax include the scoring scales (Experian uses 0 to 1000, while Equifax uses 0 to 1200), the algorithms employed, and the presentation of credit reports. Experian's report includes personal information, accounts, and inquiries, while Equifax categorizes information into sections like revolving accounts, mortgages, and consumer statements.
The discrepancies in credit scores between Experian and Equifax arise from the unique algorithms each agency uses, as well as differences in the information reported by creditors. Credit providers may report to only one agency, leading to variations in credit history and scores.
Ultimately, the choice between Experian and Equifax depends on individual needs. Lenders may have preferences for a particular agency, and it's advisable to inquire which credit reporting agency they use for evaluations. However, it's crucial to note that lenders may interpret similar credit scores differently based on their own scoring models.
In terms of accuracy, there is no definitive answer as the information reported to each agency may vary. Regularly monitoring both Experian and Equifax reports can help identify discrepancies and ensure accurate information is reflected, positively impacting credit scores.
To conclude, credit checks are vital for assessing credit applications, and understanding the nuances between Experian and Equifax can empower individuals to make informed financial decisions. Regularly reviewing credit reports from both agencies is essential for maintaining financial health and meeting qualification criteria for various financial products.
