If you've checked your credit score, you may have noticed that you have a score from each of the three major credit bureaus -- Equifax, Experian, and TransUnion. And there's also a chance that each score was slightly different.
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How can your credit scores be different, and which one matters the most? Here's a quick guide to the differences between your three scores and how they are used.
First, make sure you're looking in the right place
Before you start checking your credit, make sure you're looking at your real credit score. There are a bunch of credit scoring formulas out there that use data from the three major credit bureaus, but only one lets you know what lenders see: the FICO score, which is based on the consumer credit files of the three big credit bureaus mentioned above.
The FICO score is used in over 90% of lending decisions, so it's easily the most beneficial for you to check. The Vantage Score model is the second-most popular, but it's still not frequently used. Any other scoring model (such as Experian's PLUS score) is unlikely to be used by any lender you encounter. In fact, people in the credit industry sometimes refer to these as "FAKO scores."
Discover has started providing FICO scores as a perk of card membership, but the only place you can buy your actual FICO score is at myFICO.com. If you haven't seen your FICO score, it could be well worth the investment, especially if you want to apply for credit anytime soon.
How can my scores be different?
There are good reasons for your credit scores to be a little different, along with a not-so-good reason you need to be aware of.
The good reasons have to do with the fact that some information is reported slightly differently to each of the bureaus. For example, if you have one late payment on a loan account, the company might not report it to all three credit bureaus, although it usually will.
Inquiries are a big reason for scores to be slightly different from one another. As I'll discuss later, when you apply for a credit account, the lender might only check one of your credit reports. Inquiries can be a slightly negative factor in your credit score, so having different numbers of inquiries on your different credit reports is one common reason for your scores to be slightly different.
The bad reason for differing scores is errors. If one of the credit bureaus mistakenly lists one of your accounts as "past due" or is reporting an account that is not yours, the three scores can vary quite a bit. Looking for errors is the No. 1 reason why checking just one of your credit reports is not enough.
How the three scores are used
How your various scores are used depends on what type of credit you are applying for, as well as what credit-checking system the lender is using.
If you are applying for a mortgage, the lender will almost certainly check all three of your FICO scores. They generally use the middle score to determine your eligibility, but this can vary among lenders. So, if your three FICO scores are 708, 715, and 695, then the 708 score will be used to determine whether you qualify and what your rate will be.
If you apply for other types of credit, such as a credit card or loan, most lenders will only check one of your credit scores. However, some might check all three, especially if you are applying for a large loan amount. If you are denied credit, the lender will typically let you know which of your three credit reports the negative information was obtained from, but there is no way of knowing beforehand.
Small differences are OK
Little differences between your reports are perfectly normal, and so long as they are based on factual information (not errors), they're nothing to worry about. However, it does pay to check all three of your credit scores, not only for errors, but also so you'll know and be prepared for the worst credit score a lender can possibly see when you apply for credit.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool owns shares of Discover Financial Services. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
