Differences in Credit Reports

Credit reports are a pain enough without them mismatching for who knows what reason. But differences in credit reports are often not mistakes.

Seeing three credit reports with three different sets of information is disheartening at best. However, you shouldn’t break your head over it. Errors can occur, and it’s nothing you can’t fix.

There’s a good reason why your credit reports don’t match and we’ll explain it to you here. The same explanation applies to why your reports and credit score don’t match. Let’s talk about the score first before we proceed.

What Is a Credit Score?

A credit score is a number that ranges from 300 to 850 and represents your quality as a borrower. Lenders rely on credit scores to determine how risky an investment you are since the score is very much based on your credit history.

What that means is they’ll look at your history as a borrower and determine whether to give you a loan or not. They’ll be interested in your repayment history, the number of open accounts, and total debt among other things. All that with the goal of predicting if you’ll pay your debt back on time or not. Your credit score plays the main role in a lender’s decision to offer credit.

Besides your repayment history and total debt, lenders are very much interested in the length of your credit history. The longer your credit account has existed, the better you look in the eyes of creditors.

Another, just as an important factor, is credit utilization. It refers to the amount of your total available credit (credit limit) and the rate at which you’re using it. If you’re “maxing out” your credit card, it means you’re utilizing most of your available credit. Lenders are wary of borrowers who tend to utilize most of the credit at their disposal. Such consumers are more likely to end up with a debt they can’t repay.

You might now be wondering who collects all this data that ends up determining your credit score. That’s the duty of credit reporting agencies. The three major credit reporting agencies in the US are Experian, Equifax, and TransUnion. The data they collect about your financial history ends up on credit reports that you can get for free once a year on AnnualCreditReport.com.

Once they have your credit history, lenders determine your score based on a certain scoring model (some institutions use their own models). The most prominent and commonly used scoring models are FICO (Fair Isaac Corporation) and VantageScore. FICO is the scoring model of choice when calculating mortgage loans.

Differences in Credit Reports and Credit Score – Why They Don’t Match?

Now that we went over some basic information such as who makes credit reports and what the score is, we can address the issue at hand.

If you’ve ever requested all three credit reports from the big three (Experian, Equifax, and TransUnion) at the same time, you could have noticed that they don’t exactly match. And just as the three reports don’t match each other, your credit score differs from one credit agency to another. Why is that the case?

The main reason for that discrepancy is the fact that Experian, Equifax, and TransUnion all collect data in different ways. They’re independent companies and it’s within their right to decide how they collect data and from whom. Because of that, some credit accounts can get reported to one of the credit bureaus, but not the others.

Not every creditor or financial institution reports to all three credit bureaus, leading to various discrepancies. For that reason, it’s quite normal to receive credit reports that don’t quite match each other. That’s not something that should concern you, so long as you recognize all the items on your report.

Another cause of the mismatch may simply be an issue of time. Not all bureaus update the report at the same time, leading to different results.

Differences in Credit Reports

Just like reports don’t necessarily have to match, neither do credit scores. One obvious reason is using different sets of data to calculate your score. A more common reason is not using the same scoring model. If one credit bureau uses FICO and the other VantageScore, it’s understandable why your score may vary.

Seeing how the credit bureaus use different sets of data, errors do happen. About one in five consumers have errors on their credit reports judging by a study by the Federal Trade Commission. That is why credit repair companies such as White Jacobs and Associates exist – to help you find any inaccuracies and get them off your report. With experts at your side, your credit score is bound to improve.

Why Do We Have Credit Bureaus?

Credit bureaus exist to collect all the data about your credit history. They usually get it from various financial institutions and synthesize it into a credit report. Credit bureaus themselves don’t really have any say over whether you get the loan or not. They merely exist to collect and process data.

Entities such as banks, mortgage lenders, credit card issuers, and other personal financial lending companies then approach them and ask for a report on your creditworthiness. It’s entirely up to creditors if they’ll give you a loan based on your credit history.

What to Do If You Need Help With Your Credit Reports?

If you noticed a discrepancy in your reports or have more questions about them, contact a credit analyst today. At White, Jacobs and Associates, credit analysts are professionals who can tell you all you need to know about credit reports and the bureaus. WJA can help you get your buying power back.

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