Why Do I Have Different Credit Scores – And Which One Matters the Most?

Different Credit Scores

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If you’ve ever looked up your credit score, you may have noticed that it varies depending on the source. Your score with a bank, credit card issuer, auto loan lender, and a credit bureau like Equifax can differ, sometimes by a significant amount.

We don’t blame you if you’re confused (and perhaps frustrated) about why you have so many different credit scores. You may wonder which score is the most accurate and better measures your creditworthiness and which one you should trust.

The truth is that having multiple credit scores is entirely normal and to be expected. Mostly, it’s not a cause for concern and won’t impact your ability to get a loan. In this article, we’ll explain why credit scores differ, who creates them, and which matters the most for your financial health.

Who creates your credit score in Canada?

Credit scores are vital tools lenders use to decide whether to extend or deny you a loan. But where do these three-digit figures come from in the first place? Who assigns your credit score?

In Canada, two credit bureaus calculate credit scores: Equifax and TransUnion. These private organizations track how you manage your bills and debts. They look at factors such as how much credit you use at any one time and whether or not you pay on time. They obtain this information from various lenders and public records. From there, they enter the data into models that use complex algorithms, which, in turn, generate your credit score.

There exist companies that provide access to credit scores, such as Borrowell and Credit Karma. However, these organizations don’t compile financial data and calculate your credit score. Instead, they pull the scores directly from the credit bureaus. Borrowell purchases credit scores from Equifax, while Credit Karma obtains them from TransUnion.

Why there are so many different credit scores

Here are the main reasons that contribute to differences in credit scores:

1. Multiple scoring models

Credit bureaus employ proprietary scoring models to determine your score, of which there are many different types. As a result, your credit score will differ based on which organization you obtain it from and the scoring model it uses.

For example, Equifax relies primarily on the FICO scoring model, while TransUnion uses the VantageScore model. Thus, even if both credit bureaus have access to the same financial information about your credit experience, the scores they generate will differ.

One reason for the discrepancy in credit scores between Equifax and TransUnion is that their scoring models weigh certain factors more heavily than others. For example, credit utilization represents 30% of your overall credit score based on the FICO scoring model and 20% under the VantageScore model.

A wide range of industry specific credit scores also exists, adding to the confusion. Each of these scores is tailored toward a specific type of financing, such as a personal loan, auto loan, and mortgage. Lenders frequently use these rather than the generic version when making lending decisions. 

For example, let’s say you wish to finance a vehicle purchase with a car loan. Your lender pulls up your Equifax credit report, which uses the FICO scoring model to assess the risk of loaning you money. In this scenario, they may analyze your FICO Auto Score, as it offers a more accurate assessment of your ability to repay this type of loan. FICO provides a list of scores that pertain to certain financial products.

2. Difference in financial data reported by lenders

Credit score providers collect financial details about individuals mainly from lenders. Banks, credit card issuers, payday loan companies, and others in the lending industry report your payments and account status to Equifax and TransUnion.

However, lenders can choose which credit bureaus they report financial information. Some lenders report to both, while others report strictly to Equifax or TransUnion. Others may not supply financial data to any credit bureau.

Let’s assume that a lender only forwards your line of credit payment to TransUnion. You’ve been meeting your payment deadline for several years, which boosts your credit standing. In this scenario, your TransUnion credit score may be higher than your Equifax credit score, as the latter is missing details about your line of credit payments.

3. Financial data reported by lenders at different times

Even if a lender submits financial information to both credit bureaus, they may do so at different times. As a result, discrepancies between credit scores can arise briefly, as one credit bureau has more up-to-date details than the other.

4. Credit scores are updated at different times

Equifax and TransUnion update their financial records at different time intervals. As a result, one of your credit scores may be more accurate as it reflects more recent data than the other.

5. Different credit history length used

Each credit bureau bases your credit score on a different length of credit history. Equifax uses an 81-month credit history to calculate your credit score, while TransUnion uses an 84-month credit history. This difference can produce slight variations in scores.

6.Credit reports may contain mistakes

Errors can appear on credit reports, which directly influence your credit score.

If Equifax mistakenly records an on-time loan payment you made as late, your credit score will dip. When you look up your score, it may be lower than what appears on your TransUnion credit report, assuming they marked your payment as being made on time. The discrepancy will remain unless you contact Equifax and ask that they rectify the error.

Which credit score is the most important?

A FICO credit score is the most common type that lenders use in Canada. It’s the industry standard, with 90% of the top lenders using it to assess a borrower’s risk of default. Given its prevalence, it’s the one you should focus on, as there’s a high chance lenders will review it when deciding whether to approve your loan application.

FICO Score 8 is the most widely used version—if you’re looking for a general overview of your credit score, this is the one you should request. Other FICO scores are optimized to assess the risk of lending for specific types of loans, such as mortgages, car loans, and credit cards.

The VantageScore is a less popular credit scoring model among lenders, but it’s still reliable, so don’t hesitate to use it to check your score.

Should you worry if your credit scores are different?

Variations in credit scores are normal, so it’s not something you need to be concerned about.

There’s usually a valid reason if your credit score has dropped suddenly. A quick scan of your credit report will help you uncover what led to the unexpected drop, which could be a late credit card payment or an account that your creditor sent to a collection agency.

While you can’t change your credit score overnight, you can monitor your credit report periodically (at least once yearly) to ensure all the information is up-to-date and accurate. If you spot any errors or signs of fraudulent activity, report them to the credit bureau right away. This habit can help keep your credit score from harm.

How to find out your credit score

You can obtain your credit score directly from Canada’s two credit bureaus, Equifax and TransUnion, as well as various third-party providers.

Equifax. Equifax offers free access to your credit score online.You can also request it by phone by calling 1-800-465-7166 or ordering it by mail.

TransUnion. TransUnion offers your credit score as part of a subscription package (except for Quebec residents who can access it free of charge).

Borrowell. You can find out your credit score anytime for free by opening an account with Borrowell.

Credit Karma. Sign up with Credit Karma to check out your credit score for free.

Many of Canada’s major banks, such as Scotiabank and RBC, also provide complementary access to credit scores.

The bottom line on credit score differences

It’s perfectly normal to have different credit scores. The differences arise because Canada’s credit reporting agencies, Equifax and TransUnion, employ distinct credit scoring models to calculate your number. There may also be gaps in the financial data the credit bureaus receive from lenders, and they may update their records at different time frames, which can lead to discrepancies between scores, too.

You should only be concerned about differences in your credit scores if they arise from errors or fraud. For this reason, it’s wise to check your credit report from at least two sources at least once per year.

Aside from that, obsessing over minor variations in your credit scores isn’t worth the trouble and headaches. Instead, focus on developing sound money management habits so that you can pay your bills on time and manage your debts effectively. By doing so, your credit score will always head north, which is all that matters in the end.

If debt problems have devasted your credit score, there are many debt relief options available in Canada you can explore to get your financial house in order.

Contact David Sklar

Photo by Aathif Aarifeen

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