Understanding Why You Might Have 3 Different Fico Scores

Understanding Why You Might Have 3 Different Fico Scores

November 16th, 2012

Nearly every time an individual applies for credit to purchase a home, automobile or retail merchandise, potential lenders will review their credit score, also sometimes called a FICO score. The score is harvested from various credit reporting agencies and can instantly inform the lender on the potential debtor’s credit worthiness. For decades, credit lenders have determined that individuals with a high FICO number pose a lower risk to the lender when providing them a loan.


Using Decision Management Software to Calculate Scores

The Fair Isaac Corporation (FICO) has long offered decision management software solutions that include determinants on managing credit risk for lenders. The three top credit reporting agencies in the US (Equifax, Experian & TransUnion) use FICO software to generate credit scores on individuals.

However, each company uses their own formula within the software program to generate a unique score. As a result, each credit reporting agency might produce a different number based on identical data in the individual’s credit file.

To make matters slightly more confusing, not every lending company uses FICO scores. Some creditors create their own formulas that might also include the various FICO numbers from one, or all three, credit agencies.


The Problem with Inconsistent Scores

One reason a person might have three inconsistent FICO scores is that each of the three credit reporting agencies likely has different information in the individual’s credit file. Each agency builds the credit history of an individual by gathering information from a variety of sources, including collection agencies, lenders and court records. As a result, each credit bureau might not have current or complete data pertaining to the history in a credit file.


Incomplete Credit Data

Sometimes information slips through the cracks. If an individual has applied for credit under a different name (married name, maiden name, etc.), the credit data might be fragmented when it reaches the credit reporting agency. Other times, inaccurate data, including addresses, and social security numbers, might direct the credit information into another person’s credit file.

Lenders often report up to date credit data to each reporting agency at different times. This process can easily make one credit reporting bureau have more current information over another agency. Additionally, based on the procedures of each credit reporting agency, identical information may be recorded differently between each company.

Individuals can review their credit score from two of the three credit reporting agencies. Experian is the only agency that does not provide their FICO score to consumers. In the end, the score will reflect the individual’s credit worthiness as being poor, fair, good, very good or excellent.