Why Do You Have Three Different Credit Scores?

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Elise Amendola/AP
By Nicholas Pell

NEW YORK -- If you've ever gone to pull your credit report, you know that there are three different credit reporting bureaus. And if you've ever pulled your score, you've probably noticed that they're not all the same. So if you have three different scores and three different credit reports, why? What are the differences between the three major credit reporting bureaus?

The Pre-History of Credit Reporting Agencies

Gerri Detweiler, director of consumer education for Credit.com, points out that part of the reason for different credit scores is the past of the credit reporting industry. The "big three" of TransUnion, Experian and Equifax (EFX) were the result of the consolidations of the late 1980s. The consolidation of smaller credit bureaus also gave a regional flavor to things.

"Not every place reports to all three," says Randy Padawer, a consumer education specialist with LexingtonLaw. "Some smaller and middle-sized companies report to just one or two out of the three."

This is a holdover from the regional days. "The larger lenders will report to all three," he says. "But that's not going to be true of smaller and medium-sized firms."

Detweiler likens the differences to variations between soda pop brands. "They're each a little different, and when you go out to a restaurant, you don't get to pick what you want," she says. "Your creditor reports to them, or they don't." Similarly, your creditors will pull the report they want, not the report that makes you look the best.

The Credit Score Arms Race ...

Detweiler says that the scores are where things begin to get interesting.

"The credit-reporting bureaus are for-profit businesses in competition with each other," she says. "Their customers are the lenders. They all claim to have the most complete and accurate reporting." However, they all use algorithms purchased from FICO, a separate company from all three. They then build custom scoring systems using the system purchased from FICO. "They have a menu of different scores they send to customers for different purposes," she adds.

What's more, the three reporting bureaus have even come up with their own scoring system, called VantageScore. Detweiler says that the bureaus claim that their system is more consistent. But there are also in-house scores. "There's FICO and VantageScore and proprietary scores for each bureau," says Padawer. "When you use different scoring systems, even small variations create noticeable differences in the resulting credit scores."

What You Need to Know as a Consumer

There are some things, outside of major credit cards, that are always going to appear on all three credit reports. "A judgment is a public record, and it would be very unlikely that it would not be on all three credit reports," says Detweiler. And while big bank credit cards will be on all three, smaller credit unions might not be. What's more, some collection agencies might not report to all three. "It might save the company some money or it might be a compliance issue. Anyone who reports to a credit agency has to be set up to handle disputes," she says.

Detweiler says that while you're often told to stagger getting your credit reports, you shouldn't do that the first time you pull your credit reports. "If there's a mistake on one and not on the others, that's going to be easier to spot once you get all three," she says. "After that you can stagger them."

When you're repairing your credit, you're probably going to have some interactions with the credit bureaus. "Even though the three credit bureaus are in the same business, they're different countries with very different cultures," says Padawer. He notes that won't impact your credit score per se, but you will likely find something different in the way the companies communicate with you, as well as procedures for getting information changed. Don't assume that what you do at one agency is what you need to do at another to ensure accurate information on your credit report.
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