Applying For A Loan? Why Your Credit Scores May Differ

Posted on: 30 August 2019

When you apply for a loan, one of the most critical factors for qualifying, as well as avoiding a high interest rate, will be your credit score. Many consumers, though, may not realize that there is more than one credit score and that this means you may need to do some extra work to ensure that you get the loan you really want.

How are multiple scores possible? And what can you do about it? Here are some answers.

Why You See Different Scores

Each consumer in the U.S. generally has a credit history report (and therefore a score) from three separate companies or credit bureaus. These different companies (TransUnion, Experian, and Equifax) receive credit information from outside sources and then assign each credit history a score based on similar — but not exactly alike — computer models. 

What this means for you as a consumer is that your credit score varies slightly from company to company. Because the FICO scoring process is mostly standardized, the differences should be minimal if all three agencies have received the same information. However, large discrepancies can still occur for a variety of reasons.  

Why a Score May Vary

If the agencies use similar methods, why would you see a big score difference? Often, it's due to the company receiving different credit data from companies you use. A certain lender may report data to one or two of the agencies but not the third one. Some agencies may include non-credit information, such as landlord data, as well. If the source data is different, the results could be better or worse than other agencies.

Also, one credit company may have an error in their particular credit history report. If the error is internal, it wouldn't show up in the histories of the other two agencies. 

What You Should Do

When possible, always check all three credit histories to compare them with each other. Investigate any differences found between reports — both positive and negative. An error could result in any one of the three reports being higher or lower, and you may not know in advance which one a lender will use.

When you apply for a specific loan, ask which credit agency will be checked before approving your loan. If they can tell you this, focus on that agency's specific score to be sure that you don't see any surprises.

The better prepared you are for a loan application, the more likely you are to receive the money you need for a low interest rate whenever you visit with a loan service. And by understanding how your three credit scores work, both together and separately, you will be able to apply for credit with confidence.