If you check your credit report, it is possible to notice a big difference in the score. It isn't necessarily a sign that you are having financial difficulties or have bad credit behavior. There are some reasons your score might be higher or lower than you should. Most of the time, these differences can be attributed to reporting errors and/or errors. Any errors can easily be corrected by speaking directly to the creditor or credit bureau.
There are a variety of different scoring models used by different credit reporting agencies. Each one weighs information differently. FICO is the most commonly used scoring model. VantageScore also has a scoring model, but requires more data.
According to a new study from the Consumer Financial Protection Bureau, consumers can get significantly different scores from creditors. This is largely due to the fact that some companies do not report to all three of the nation's main credit reporting agencies (CRAs) at once. That's because CRAs use different scoring models and rely on different types of financial data.
A Dodd-Frank Act-related study led to a series of studies by the Consumer Financial Protection Bureau that examined the various differences in credit scores, and other similar functions. These studies weren't intended to prove that credit rating agencies purposefully try to fool consumers, but the results were quite surprising.
FICO is a basic credit scoring system. This is the most common credit score that you will see on your credit reports. This score usually reflects your credit history, usage and other information that helps lenders make a decision about whether you are a good or poor risk. Creditors regard the score as a measure for your risk of not being able to pay off your debt. It will vary from one bureau.
VantageScore uses a similar scoring model and focuses more on your history with credit cards, loans, and other financial transactions. The scoring model uses a series of factors to weigh your credit history, including the length of your credit history, recent payments, and the types of debt you carry.
There are some interesting differences between urban and rural consumers in credit scores. Both groups share the same credit rating system but the average credit score of the former is lower. The local economy and the population may influence these scores. Urban areas tend be more financially secure and residents in metropolitan areas have better credit habits.
It is important to ensure that your reporting is consistent in order to achieve a higher score. Contact your creditor to verify that your credit limit was reported to all three credit agencies. You should be able for them to correct the error but it could take some time.
You may also be affected by a credit account that has not been reported to credit agencies. Your credit report should be checked for errors like past names, loan amounts and credit card accounts.