Why You Can Have Two Different Credit Scores
Is it possible to have two different credit scores at a time? It is absolutely possible. You should not get confused about this. By the time you finish reading this article, you will know that that it is not unlikely for one person to have two or more different credit score per time.
What is Credit Score?
Credit score is the three digit figure assigned to you to represent your creditworthiness. If you want to borrow money, the lender will like to know your credit score. This will allow him to determine whether you are creditworthy or not. It will help him to predict your likelihood of repaying the loan or whether you are going to difficult. In essence, lenders use your credit score to gauge the risk involved in lending you money. FICO credit score range starts from 300 to 850. The lowest being the worst while the highest number is the best. For clarity, below is the table showing the FICO credit score range:
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| Bad | 300 – 549 |
| Poor | 550 – 649 |
| Fair | 650 – 699 |
| Good | 700 – 749 |
| Excellent | 750 – 850 |
The simple interpretation of the table is that, if your credit score falls within 300 and 549, it means that your credit is bad. With a bad credit score, it may be difficult to get a lender that will be willing to lend you money. Although there are certain loans or credit that specifically target people with bad credit. The problem with such loans is that they usually come at very high interest rates. On the other hand, people with excellent credit score tend to enjoy good interest rates. Lenders will be willing to lend them money as they believe that people with excellent credit score will most likely pay back their loans. The reason is simple. Before anyone can have an excellent credit score, such person must have a good credit and payment history. So, what the lenders do is to use your credit history to evaluate your creditworthiness and to predict your likely credit behaviour in the future.
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As mentioned, before any lender will grant you loan or credit, he will first check your credit file to determine your credit score and to see if you have history of late payments. They also check your credit file for other public credit information they may want to know about you. So, when you are shopping for loans, it is possible for two lenders to check your credit file and come with two different credit scores. The reasons for this are discussed below:
Reasons for having different credit scores
- Different scoring model being used by credit bureaus: Each credit bureau uses its own peculiar scoring model. For instance, the scoring model being used by FICO is quite different from the one used by VantageScore. Also, they have different credit score range. Therefore, if someone says that your credit is a particular figure or that your credit is poor, you may need to find out which scoring model was used or where did he get the information from. For instance, the VantageScore 3.0 range is as follows:
Bad 300 – 619 Fair 620 – 659 Good 660 – 719 Excellent 720 – 850
As you can see, if a lender gets your credit score from VantageScore and it reads 660, you will be rated as having a good credit score. But with the same 660 with FICO score, you will be considered as having a fair credit score. That is just one aspect of it. The second aspect is that the two credit rating agencies uses different scoring formula to arrive at their scores. FICO uses the following scoring formula:
Payment History 35%
Credit Utilization 30%
Credit Age 15%
Types of Credit 10%
New Credit 10%
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On the other hand, VantageScore 3.0 scoring formula is quite different as you can see below:
Payment History 40%
Depth of Credit 21%
Credit Utilization 20%
Balances 11%
Recency of Credit 5%
Available Credit 3%
With the two different scoring formula, you will agree with me that there is no way the two credit rating agencies can arrive at the same credit score for an individual even though the use the same credit information about the person. That is why it is possible for one person to have two different credit scores per time.
- Lenders may not report data to all major credit bureaus. There are three major credit rating agencies namely Experian, TransUnion and Equifax. Lenders may not necessarily report your credit to all the three credit bureaus. Since credit bureaus only work with the reported credit information, you will definitely have two different credit scores if they don’t have the same credit information about you.
- Scores are from different dates: Your credit score is not static. It keeps changing as your credit information changes per time. So, if you are comparing your credit score, it is better to collect your scores from different credit bureaus at the same date.
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So, having two different credit scores is possible. The question you may want to ask is, which one should you rely on? Before you rely on any credit score, I suggest that you should apply for your free credit report from the three major credit bureaus. Check and compare the three reports for possible errors and omission. If there are errors, you should see to it that they are corrected. You have the right to dispute anything you don’t agree with in your credit report. If you are now sure that your credit reports from the three credit bureaus are accurate, you can then rely on any of your credit score. The most important thing for you is to know where you got the score and the interpretation of it. If your credit is bad or poor, it may be the right time to start repairing or improving your credit score. There are people or organizations out there that will promise you that they will help you build your credit score overnight. You need to be careful about whom you share your credit information with in order not to fall victim of identity theft. Credit repair is what you can do yourself. You can read some of my other articles on how to build your credit score for guidance.