Which credit score matters most?

Here at Keeping Score, we know that credit scores and all that goes into creating them can be confusing.

Among the most confusing aspects to consumers is that there are multiple credit scores and more than one credit bureau reporting on your financial history. Let’s see if we can make some sense out of it all. 

Why are my credit scores different?

Your credit reports may vary

Let’s talk about the credit bureaus first. As noted, there are three main credit bureaus that receive and process your information. They are Equifax, Experian and TransUnion.

Your creditors are not required to report your information to all three. Most of the major national creditors like Chase or American Express will, but some smaller regional or local lenders may only report to one. For that reason, your scores can vary across the three bureaus because scores are based on the information in that particular credit report. If an account history is on one bureau file but not the others, your score will be different.

This is one of the main reasons why you should pull all three credit reports at least every year at AnnualCreditReport.com. By comparing the reports, you can see what data each bureau has in your file. It is also the best way to identify any errors on your reports.

The billions of pieces of information that the bureaus deal with monthly practically guarantees that sometimes mistakes will happen. Most times, it is up to you, the consumer, to correct those errors. Fortunately, the process is easy. Just follow the instructions you get with each credit report and inaccurate or out-of-date information will be corrected or removed.

Check out all the answers from our credit card experts.

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Credit scoring formulas change

Credit scoring companies are constantly studying the economy and consumer behaviors. So, depending on which score or version of a score a lender uses, your score will vary. Why? Because credit scoring is a very competitive business, they regularly introduce improvements to their scores to account for changes in consumer behavior. They also incorporate new information and technology to help lenders better predict risk.

This constant tuning of scores allows lenders to more confidently offer access to lower-cost credit to more consumers. However, many lenders don’t purchase the new updated scoring tools. A couple of reasons why they may stick with say, FICO 7 instead of opting for FICO 10, are the cost to upgrade and that their current (already paid for) scoring model works fine for them.

There are two major scoring companies widely used today – VantageScore and FICO. VantageScore reviews its scoring system annually and makes adjustments. Its most recent model is VantageScore 4.0; it was the first to include information about utility, cellphone and rent payments.

In 2019, FICO announced two new credit scores, FICO 10 and FICO 10T. FICO 10 is an update of its traditional scoring models. Like VantageScore 4.0, FICO 10T incorporates something called trended data. Whereas other credit scores are a snapshot of your credit history on the day you order your score, FICO 10T will score your credit history over time.

The intent is to identify trends in the way a person manages debt. For example, a lender may be able to tell that a person has had some problems in the past but has been improving, so they could be a good credit risk. Such a score could result in approvals when an older score would have resulted in an application being denied.

In addition to all of that, lenders do not all update at the exact same time, which can account for score differences from one day to the next. These differences are usually not that significant, but they could be if you significantly pay down an account or even pay one or two off.

See related: When do credit card companies report to credit bureaus?

Which credit scores do lenders look at?

Chances are your lender will use either a VantageScore or a FICO score. FICO is the most widely used score today. However, some lenders and other users (like insurance companies) have their own custom scores.

For the purpose of this column, we will focus on these two. While I have a lot of confidence in the VantageScore, there is no doubt that more lenders prefer FICO when making their decisions. But even within FICO, there are multiple versions and the score your lender sees may very well be generated with a different version from the score you get when you order a score on your own.

The same is true for VantageScore; multiple versions are out there and in use. By and large, the differences should be small and a good score on FICO 7 should be a good score on FICO 8 or VantageScore 3.0.

Which credit bureau is used most?

This one is a little trickier and that’s mainly because for someone like a mortgage lender, all three bureau reports and their accompanying scores are pulled.

The big three bureaus have also partnered with various banks and lenders in a variety of ways. For instance, many credit card companies now offer their customers free credit reports and scores as an added benefit. The credit report may be from any of the big three and the score could be either FICO, VantageScore or in some instances even their own custom score.

As an example, Chase’s Credit Journey offers its customers a score using the VantageScore 3.0 model based on Experian’s credit report. Discover, on the other hand, uses your Experian report and gives a FICO score. Capital One’s CreditWise program uses your TransUnion report, but gives its customers a VantageScore.

Credit bureaus are highly competitive companies that aggressively market their reports to lenders. The result is that in your area one bureau’s reports may be used more than the other two, especially when you are dealing with a local or regional lender.

See related: Which credit scores do mortgage lenders use?

Which credit score is the most important one?

Again, the answer here can be tricky. Usually, when someone wants to know the answer to this question it is because they are about to apply for credit of some kind and want to be sure that their score is going to stack up. While there are no guarantees – preapprovals notwithstanding – a few points one way or the other will probably not make much difference. However, if you are on the cusp of one of the credit score tiers it certainly could. For this reason, it makes sense to find out as much as you can.

If you are in this situation the most important credit score for you is the one your lender is going to be using. This is a fair question to ask the lender when you are deciding who you want to use. However, just knowing that they will use FICO and Experian will not assure you that you will get the same score if you order your credit report and score from the same companies.

See related: Credit report vs. credit score

Bottom line

Variations in the timing of when a credit report is ordered, when payments are posted as well as in score versions will often yield a different score from the one you get. What is most important to remember about it all, though, is that for the most part the scores you are able to access should be fairly close to the scores a lender will pull. If they are not, you have the right to find out why.

Credit scores and reports do not discriminate on the basis of race, orientation, gender or national origin, but some lenders may still (unconsciously or otherwise). If you feel the deal you are offered is not in line with your credit history and score, raise your concerns with management or file a complaint with the Consumer Financial Protection Bureau.

Remember to keep track of your score!