You’ve taken the step to find out what your credit scores are. Hats off to you! You’ll be pleased to know that you’ve also taken the first step to improving your credit health and along with it, your financial well-being.
But if you’ve checked your scores with different providers — banks, credit monitoring services (like us) and credit reference agencies — you might be confused and possibly a little alarmed as to why your scores with each of them differ.
Worry not. Here we reveal the not-so-mysterious mystery behind the numbers.
What is a credit score?
Why is my Credit Karma credit score different?
Can I trust TransUnion with my credit scoring?
Why it’s important to check your credit scores
What is a credit score?
Let’s go back to basics for a moment. Everyone over the age of 18 has credit scores. Put simply, they are numbers that show how creditworthy you’re deemed.
The higher the score, the higher your chances are of getting credit. Therefore, knowing what your credit scores are arms you with information about how successful you’re likely to be when applying for a mortgage for the house of your dreams, or whether a new provider will give you that all-singing-all-dancing mobile phone contract.
And how are these magic numbers formulated? Well, a credit score is worked out from information that’s provided in a credit report. In the U.K., these reports are provided by credit reference agencies who gather data on how well you’ve managed credit in the past and how well you make your repayments.
For a more in-depth read on everything you need to know about credit scores and credit reports, take a look here.
Why is my Credit Karma credit score different?
“So, what’s with all the different numbers?” you may ask. They’re not meant to bamboozle you. But we know they may seem, well, bamboozling.
Basically, each credit reference agency has a slightly different formula it uses to calculate your score. Credit Karma uses the credit reference agency TransUnion, which scores out of 710. Other providers have different scoring ranges — Experian is up to 999 and Equifax is 1000 — so a direct comparison of scores doesn’t really tell you much.
Added to this, some lenders report to all three major credit reference agencies, while others report to only one or two. This means you could be seeing different scores because of the slightly different credit report information supplied by each provider.
What’s important to remember, whoever provides your score, is they’re all basing it on similar information — like the length of time you’ve been on the electoral register, whether you’ve shown you can make repayments on time and stay within credit limits, and how heavily you rely on credit.
And, of course, the higher your scores are, the better chance you’ll be able to get the credit you need, when you need it – and at a better rate.
Can I trust TransUnion with my credit scoring?
TransUnion is one of the three main credit reference agencies in the U.K. TransUnion uses data and technology to build a comprehensive picture of each person’s financial history. By providing a reliable source of information about a person’s ability to pay their debts, TransUnion can help lenders lend responsibly. Credit Karma partners with TransUnion to provide your credit score and credit report. If you’re worried about anything on your report, you can always contact TransUnion and raise a dispute, either through your Credit Karma service or directly.
Why it’s important to check your credit scores
Checking your credit scores is an essential first step on your journey to financial well-being — helping to put you firmly in control. Knowing your scoreshelps you to spot any inaccuracies in your reports and protect against fraud. It also lets you see how lenders view you, as well as giving you the know-how to improve and, most importantly, get the credit you’re looking for.
Bottom line
Understanding that your credit scores differ among agencies is nothing to fear. And knowing what your credit scores are puts you in the driving seat when it comes to your finances.
Since each agency independently determines your credit scores based on the information in their individual databases, there may sometimes be slight differences. Some lenders also only report to one or two credit reporting agencies, which means your credit history could look different from agency to agency.
Your credit reports from Experian, TransUnion and Equifax could have different information because creditors can choose which bureau(s) they want to report to, as well as what they report and when. As a result, the same scoring model could give you different credit scores based on each of your three credit reports.
All of your credit information may not be reported to all three credit bureaus. The information on your credit report is supplied by lenders, collection agencies and court records. Don't assume that each credit bureau has the same information pertaining to your credit history.
Credit scoring models can weigh certain information in your reports more heavily than other credit score factors. For example, one scoring model may put more emphasis on total credit usage than others. Because there are varied scoring models, you'll likely have different scores from different providers.
Although Experian is the largest credit bureau in the U.S., TransUnion and Equifax are widely considered to be just as accurate and important. When it comes to credit scoring models, however, there is a clear winner: FICO® Score is used in roughly 90% of lending decisions.
FICO scores are generally known to be the most widely used by lenders. But the credit-scoring model used may vary by lender. While FICO Score 8 is the most common, mortgage lenders might use FICO Score 2, 4 or 5. Auto lenders often use one of the FICO Auto Scores.
For the majority of lending decisions most lenders use your FICO score. Calculated by the data analytics company Fair Isaac Corporation, it's based on data from credit reports about your payment history, credit mix, length of credit history and other criteria.
This is because Credit Karma makes use of another credit scoring model compared to many lenders and possibly does not have access to all the data required to calculate your credit score.
While achieving a CIBIL Score of 900 is technically possible, it is extremely rare. Scores above 760 are considered very good or exceptional, providing significant benefits such as lower interest rates and higher chances of loan approval.
And when it comes to credit, 850 is the highest the FICO® Score☉ scale goes. For more and more U.S. consumers, practice is making perfect. According to recent Experian data, 1.54% of consumers have a "perfect" FICO® Score of 850.
FICO 8 scores range between 300 and 850. A FICO score of at least 700 is considered a good score. There are also industry-specific versions of credit scores that businesses use. For example, the FICO Bankcard Score 8 is the most widely used score when you apply for a new credit card or a credit-limit increase.
Of the three main credit bureaus (Equifax, Experian, and TransUnion), none is considered better than the others. A lender may rely on a report from one bureau or all three bureaus to make its decisions about approving a loan.
What is a good credit score range for buying a home? If your credit score range is between 740 and 850, you are likely to have the widest range of choices and the most attractive interest rates for your mortgage loan.
Since each agency independently determines your credit scores based on the information in their individual databases, there may sometimes be slight differences. Some lenders also only report to one or two credit reporting agencies, which means your credit history could look different from agency to agency.
This is because Credit Karma makes use of another credit scoring model compared to many lenders and possibly does not have access to all the data required to calculate your credit score.
An Equifax credit score isn't used by lenders or creditors to assess a consumers' creditworthiness. Instead, many lenders use FICO Scores® to help determine a potential borrower's creditworthiness. FICO uses credit scores from the three reporting agencies, including Equifax and Transunion, to determine their score.
Introduction: My name is Twana Towne Ret, I am a famous, talented, joyous, perfect, powerful, inquisitive, lovely person who loves writing and wants to share my knowledge and understanding with you.
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