Multiple Credit Scores
Many consumers do not understand why they have three different credit scores and the purpose of having three different credit scores. There are three major credit bureaus: Transunion, Experian, and Equifax. Each one of the three giant credit bureaus have their own way of calculating a consumer’s credit score and each consumer will have a different credit score from each of the three credit reporting agencies. Mortgage lenders use the middle scores of a mortgage loan applicant when it comes to qualifying for a mortgage loan application. For example, say your Transunion credit score is 600, your Experian is 650, and your Equifax is 700. The middle score is 650 so the mortgage lender will use the 650 credit score as your credit score. Some commercial mortgage lenders will choose which credit bureau they will use. For example, there are mortgage lenders that will just use Equifax and whatever your Equifax credit score is, that will be the credit score they will use. Some auto lenders will only use Transunion and so will credit card companies. It is up to your creditor which credit score they will go by in evaluating your credit.
How Do Credit Bureaus Evaluate Your Credit Scores
Each of the three credit reporting agencies uses a different way of deriving your credit scores. Equifax is the only credit reporting agency that sells the FICO credit scores to consumers. Equifax suses the BEACON terminology to refer to the credit scores sold to other businesses. The Equifax credit score ranges from a low of 350 to a high of 850. Experian and Transunion has their own credit scores that is based on the FICO credit scoring system. The Experian credit scoring model is known as Experian-Fair Issac Risk Model or PLUS and their low score is 330 and highest score is 830.
The Transunion credit scoring model is known as EMPIRICA and the low score for Transunion is 300 and their highest score is 830.
Both Experian and TransUnion developed their own credit score calculations based on the FICO scoring model.
Credit Bureaus: How Do They Work?
Each of the three giant credit reporting agencies collect data from consumers independently of one another and they normally share their datas among each other. Many creditors report their results to all three credit bureaus, however, not all creditors report them to all three. Some creditors only report to one or two out of the three credit bureaus. For example, if ABC Bank reports a late payment to Transunion and Experian but not Equifax, your Equifax credit report may be higher because the late payment from ABC Bank is not being reported to Equifax.