Have you ever wondered why if you log in to Credit Karma you see that you may have a 740 credit score but then you log in to Experian and you have a 680 credit score? This can be very confusing for some people to understand, but there is a logical answer. In this article, I hope to shed some light on why you might see a different credit score every place that you look.
First, let’s think about all the places that we see our credit score. Almost everybody has an account at Credit Karma or Experian, but now even our credit card statements are now showing our credit score. If you go to get a mortgage or buy a car, the loan officer will also tell you a credit score. Basically, there are probably 50 different places you could check your score. Now let’s discuss why the scores might be different.
You have to understand that if you have 10 tradelines on your credit report, then your credit score can change 10 times per month. If you have 20 tradelines on your credit report, then your score can change 20 times per month. A tradeline is just an account; so if you have two cars, a mortgage, and three credit cards on your credit report, you have six tradelines all together. The creditors that report the information will report the info one time per month, which includes changing all the data one time per month. The data they report includes balance, limit, payment history, and utilization/amount owed. As those factors change, the data the creditors report changes, too.
Every time you check your credit the most recent data is pulled thus giving your credit score. So if you check your credit today, it would pull the data from today and give you a score based on that data. If you were to go back and check your credit report tomorrow, some of those tradelines may have been updated, which would result in your credit report looking completely different. This includes but is not limited to your credit score.
Now let’s add to the mix that there are three main credit bureaus – TransUnion Experian and Equifax. Let’s say that you have a tradeline from Discover with a balance on your credit card and reports it today. This does not mean that Transunion Experian and Equifax are going to implement that new data as soon as it is provided to them. They might not do it until the next day. This means that when you pull a three-bureau credit report, you are seeing your credit with what current information those bureaus have updated.
Let’s add another distinguishing factor into this mix. There are over 20 different credit scoring models that score the same data. For example, FICO has 10 different credit scoring models. The second largest data reporting agency in the country is Vantage. They currently have four scoring models. It’s important to know that Experian will give you a FICO score, but Credit Karma provides you with a Vantage score. Most creditors pull a FICO score to approve you for any sort of credit.
At BNB Credit Builders, we advise clients to use their Vantage score (i.e., Credit Karma) to asses the health of each tradeline. Use it to verify your accounts are reporting accurately. Do not rely on the score you see provided by Vantage. Currently, only 1% of banks are actually utilizing the Vantage score. 99% of banks are using FICO scoring models.
It can take some time to learn and comprehend this information so here is a little short cut to remember. Every time you go to get a loan, ask the loan officer which credit bureau they are going to pull your credit report from and what scoring model are they going to use. If they are unsure, it is information that they can easily find out.
Here’s an example: when I go to Keybank, I know that they pull an Equifax score and they currently use a FICO 8 scoring model. When I go to PNC bank, I know that they pull an Experian score, and they also use a FICO 8 scoring model. When go to Erie Federal Credit Union, they pull an Experian credit score, but use a Vantage 3.0 scoring model.
You might ask yourself why does this matter and here is the answer. Knowing this information allows me to build up the credit I need to get approved with a good interest rate at whichever bank I’m visiting for credit. Personally, when I go to get a loan, I don’t have to wonder if I’m going to get approved. I always know for a fact that I’m going to get approved ,because I know my credit score before I walk into the branch. I know what bureau they pull and which scoring model they’ll use. I assess this information myself before I ask for a loan or any other kind of credit.
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