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As two of the three major credit bureaus, both your TransUnion and Equifax credit scores are potentially important but are often different because they use separate scoring models.
Further, scores often differ based on the credit score version used and the information that each credit reporting agency may or may not have received.
How Are the Two Scores Different?
A consumer credit score is a three-digit number between 300 and 850 that a prospective lender such as those that offer financing for home mortgages, car loans, personal loans, or credit cards might use for assessing a borrower’s creditworthiness.
Experian, TransUnion, and Equifax are the three primary agencies that receive consumer credit information and compile credit history reports.
One reason why there are different credit scores is that each lender does not necessarily report their credit account activity to all three credit bureaus.
Another reason why your Equifax credit score and TransUnion score might differ is that there are two primary credit scoring companies. These include the Fair Isaac Corporation (FICO) and VantageScore, which each use different credit scoring models.
Also see: The Best Way to Check Your Credit Score
The Equifax credit scoring model uses five primary metrics and each has a certain level of weight or influence as follows:
- Payment History (35%): The largest influence on whether you have a good credit score or a bad credit score is your borrowing and repayment history.
- Amounts Owed (30%): Your overall amount of debt plays a role; however, your credit utilization rate is also very important. Your credit utilization rate is a percentage calculated by dividing the sum of all credit card balances by the sum of all credit card account limits. Utilization rates below 30% are typically considered good.
- Length of Credit History (15%): Demonstrating a multi-year history of responsible credit use is important.
- Credit Mix (10%): Showing creditworthiness across a “mix” of installment loans, revolving credit accounts, or mortgage loans helps your credit score.
- New Credit (10%): Avoid applying for or opening too many credit accounts in short periods of time. Each of these instances may create a “hard credit inquiry” on your credit report that might suggest unexpected financial problems exist.
The TransUnion VantageScore model uses a similar group of metrics as follows:
- Payment History: 40%
- Length & Type of Credit: 21%
- Credit Utilization: 20%
- Total Account Balances: 11%
- Recent (New) Credit Activity: 5%
- Available Credit: 3%
Do Lenders Look at TransUnion or Equifax?
Lenders may view credit scores from one or more of the major credit bureaus. According to FICO, roughly 90% of lending decisions are based on FICO score data.
FICO creates scoring models for Equifax, Experian, and TransUnion as well as a host of industry-specific scoring models.
While some lenders in the credit card or auto loan market might only look at scores from one of the credit bureaus, mortgage lenders usually perform a more exhaustive review by looking at data from all three credit bureaus.
Traditionally, FICO Score 2 was most widely used and the Equifax algorithm most closely aligns with FICO’s model. Lenders that look at all three scores often calculate a median score across all three, while those who look at two often use the lower of those two.
Today, many mortgage lenders use the Equifax Beacon 5, which is based on FICO Score 5, or TransUnion’s FICO Risk Score 4, which is based on FICO Score 4. Mortgage lenders that use Experian commonly use the FICO Isaac Risk Model v2, which is based on FICO Score 2.
Lenders operating in the realm of auto loans often rely on Equifax’s FICO Auto Score 5 or TransUnion’s Auto Score 4. Lenders in the credit card market often use Equifax’s FICO Bankcard Score 5 or TransUnion’s FICO Bankcard Score 4.
Also Read: How to Get a Free FICO Score
According to Chase, some lenders might choose to reference a TransUnion or Equifax credit report based on agreements (contracts) that require maintaining some minimum number of reports.
Other factors that might dictate a lender’s selection include which state they are located in or the cost of obtaining reports from the different bureaus.
Which Credit Bureau is Most Accurate?
Aside from reporting errors, neither TransUnion nor Equifax demonstrates better accuracy. However, some credit bureaus have traditionally collected and reported different information.
For example, Equifax is known for reporting more lengthy credit histories. TransUnion will often report more personal information such as a more detailed history regarding an individual’s employment.
In many cases, credit scores from Equifax are slightly lower compared to those from TransUnion stemming from reporting variances. Equifax is also a good business credit score source.
Under the Fair Credit Reporting Act (FCRA), you may receive a free copy of your consumer report from each of the credit bureaus annually.
Checking your credit file regularly is encouraged, as a means of credit monitoring for those seeking to build credit, to identify potential errors, and for identity theft protection purposes.
Does It Matter That My Credit Reports Show Different Information?
Until all lenders are required to report credit account information to all three credit bureaus, disparities in credit history will likely continue to exist.
Some suggest that with access to hundreds or thousands of scores that result from reporting variances and many different possible credit scoring models, the significance of one particular model or score diminishes.
In our increasingly data-driven economy, lenders are continually becoming more sophisticated and many are creating proprietary scoring models and formulas for evaluating prospective borrowers.
A study conducted by the Consumer Financial Protection Bureau (CFPB) found that most credit scores accessed by a consumer will differ from the score seen by a lender at a given time.
The CFPB went further to explain that the major credit bureaus, FICO, and VantageScore compete with one another to a certain degree. For this reason, creating unique and innovative credit reporting products is often a goal.
Yet, the CFPB finds that despite the various models, the results correlated by more than 90%. For example, individuals with a “good” credit score from one source are also likely to have a good score from most other sources.
To illustrate this point, let’s compare the assessment of scores between the following competing models:
|Equifax Model||TransUnion’s VantageScore Model|
|Poor||280 – 559||Very Poor||300 – 499|
|Fair||560 – 659||Poor||500 – 600|
|Good||660 – 724||Fair||601 – 660|
|Very Good||725 – 759||Good||661 – 780|
|Excellent||760 – 850||Excellent||781 – 850|
Which Credit Bureau’s Score is More Widely Accepted?
In terms of size, Experian is the largest U.S. credit bureau today; yet, Equifax and TransUnion are also widely accepted. Since beginning operations in 1899, Atlanta-based Equifax now employs more than 13,000 people spanning 24 countries in the world today.
TransUnion began operations in 1969, is headquartered in Chicago, and maintains a presence in more than 30 countries.
Today, Equifax, TransUnion, and other companies in the financial sector are expanding their product offerings such as identity theft programs, consumer or business credit builder options, and many others.
All three major credit bureaus will provide consumers with a copy of their credit report each year and have quick and easy ways for individuals to file disputes.
U.S. consumers are encouraged to regularly review their credit reports. If potential errors exist, submitting a written explanation along with any relevant, supportive documentation should result in corrections being made quickly.
After receiving a formal dispute, the major credit bureaus have 30 days to assess the validity of your claim. The process of investigation may then extend up to 45 days based on the circumstances.
Although not directly impacting your credit score, other entities in the U.S. also retain potentially influential information pertaining to your financial background that might have ramifications.
For example, ChexSystems generates reports that might reveal involuntarily closed bank accounts from overdrawn checking accounts or negative account balances that remain unpaid.
The Comprehensive Loss Underwriting Exchange (C.L.U.E.) maintains a seven-year history of any insurance claims made to auto or property insurers, which can have a significant influence on the cost of your future premiums
TransUnion and Experian are both well-established organizations in the realm of receiving, organizing, and reporting credit information. Despite the similarities, they both use differing models for calculating the credit scores of consumers today.
Consumer credit scores, regardless of whether they are calculated by either agency, are based on the accuracy of the credit account information provided by lenders.
Fortunately, most mortgage lenders and many others tasked with lending decisions will not base their decisions solely on the score provided by a single credit bureau.
Anthony Amodeo is a regular finance writer in both business-to-business and business-to-consumer industries. Particular areas of focus include personal finance, small business, real estate, and more. He is a graduate of Kent State University. His credit scores are top tier.