Your credit report may show a marked difference in your score. It's not necessarily an indication of bad behavior or financial distress. There are some reasons your score might be higher or lower than you should. Most cases are due to errors or differences in reporting. You can fix any errors by working directly with the creditor or the credit bureau.
Credit reporting agencies may use different scoring methods. Each model weighs information differently. FICO is the most popular scoring model. Other models include VantageScore, which uses more data to calculate a score.
According to a new study from the Consumer Financial Protection Bureau, consumers can get significantly different scores from creditors. This is due to the fact some companies don't report to all three national credit reporting agencies. That's because CRAs use different scoring models and rely on different types of financial data.
A Dodd-Frank Act-related study prompted Consumer Financial Protection Bureau research that looked at the differences in credit scores. Although they weren't specifically intended to determine if credit rating agencies were intentionally trying to trick consumers with their scoring systems or not, the results were quite revealing.
FICO is the most basic credit scoring system. This is the score you will likely see in most credit reports. This score usually reflects your credit history, usage and other information that helps lenders make a decision about whether you are a good or poor risk. Creditors see the score as a measure to assess your risk of not repaying your debt. However, this score may vary from one bureau.
VantageScore uses a similar scoring model and focuses more on your history with credit cards, loans, and other financial transactions. The scoring model weighs your credit history using a range of factors including your credit length, recent payments and the type of debt that you have.
One of the most interesting differences in credit scores is between rural and urban consumers. Both groups share the same credit rating system but the average credit score of the former is lower. These scores may also be influenced by the local economy and population. People who live in urban areas tend to be more financially secure.
One of the most obvious ways to get a better score is to make sure your reporting is consistent. Contact your creditor to verify that your credit limit was reported to all three credit agencies. While they will be able to correct the error quickly, it is possible for some time.
There are other factors that can affect your score, including a credit card account that is not reported to the credit bureaus. Check your credit reports for errors.