Working in a branch, we have a lot of members that come in and are taken aback when we pull their credit score. They were diligent in monitoring their score through online services like Credit Karma or through scores given by their credit card provider, but when they came in to apply for a loan or credit card, their score is not what they’d expected. This is because the idea that each person has one “true” credit score is a fallacy. Credit scores and credit reporting can be complex, so let’s break it down.

Let’s first look at the information that goes into calculating a credit score. There are three main credit reporting bureaus which keep track of a person’s total amount of debt, the age and payment history of each outstanding loan or credit card, the types of debt that you owe, and the total number of inquiries made about your credit in relation to an application for a loan or credit card within the past two years. These bureaus are Equifax, TransUnion, and Experian. Ideally, all three bureaus would have identical information. Unfortunately, maintaining these complex records for all US consumers is a lot of data to process and errors sometimes occur. Additionally, some financial institutions will only report payment history to some, but not all, bureaus. What this means to you is that if one credit score is calculated using the data on-file with TransUnion and another is calculated with data on-file with Equifax, you may end up with different scores if the data on-file between the two bureaus was inconsistent.

Next, we’ll look at how all your personal data is calculated into a credit score. In order to make this happen, some decisions must be made: What are the most important pieces of information – showing that you’ve had an account for a long time? Managing a credit card limit responsibly? How important are late payments? How important are small collections accounts or medical payment data? These decisions are important as they impact how each piece of information factors into the calculation. They also matter to lenders as some pieces of information may be more important for some loan decisions than others. For example: Managing a credit card limit responsibly may be less important when looking at a buyer’s ability to handle a mortgage payment but may be very important when the same buyer is applying for a credit card. This results in a variety of calculation methods that have been created over time-each with slightly different calibrations on the priorities and importance of each data item. The FICO score is the most universally known, but there are currently 9 versions of a FICO score! What this means to you is that if you apply for a home with Del-One, we will check your FICO 4 score, but if you apply for a credit card, we will check your FICO 8 score. Even if both scores were pulled using the same reporting bureau and identical data, you will likely end up with two different scores because of the differences in the calculation method.