Most people know that their credit score is important for their financial health and future, but few people know everything there is to know about their credit score. For instance, did you know that you have more than one credit score?
You actually have a few different scores, and they’re all a bit different from one another. Let’s take a deeper dive and look at two of your credit scores in more depth: your Transunion and Equifax scores.
What are credit bureaus?
First things first, we need to understand the organizations that are responsible for calculating and tracking your credit scores: credit bureaus.
Credit bureaus are businesses that compile, organize, and maintain information about your credit in a document called a credit report. They hold all of the most important information about your financial history.
With what’s called “permissible purpose,” credit bureaus can sell this information to other businesses and organizations that make financial decisions about you. Credit bureaus are also responsible in part for relaying information about your credit to banks, lenders, governments, and even employers and landlords.
This information helps these institutions and individuals make choices about how much money to lend you, what interest rates to offer you, and other decisions that can affect your general financial well-being.
There are three main credit bureaus in the United States: Equifax, Transunion, and Experian. Each of these institutions keeps track of your financial history and compiles its reports, although these reports typically include the same information.
That being said, your score from each institution can be slightly different.
What’s the difference between a credit score and a credit report?
Your credit report is not the same as your credit score, although they are linked. Your credit report is a document containing all of your financial details, which are available to the credit bureaus.
This document has several sections, including identifying records, credit accounts, credit inquiries, and public records information. This information, when considered together, gives lenders a detailed account of your financial history and your ability to repay loans.
Your credit score is a number calculated using the information contained in your credit reports. Credit scores give a quicker snapshot of your financial situation to lenders, using a simple number to indicate your financial health.
Each credit reporting bureau uses its own proprietary model for calculating credit scores, which means that each credit bureau may have slightly different scores. Sometimes, however, your credit scores may be wildly different.
Why are Transunion and Equifax credit scores different?
If you see that your Transunion score is different from your Equifax credit score, then there are a few factors that may be at play.
First and foremost, if the difference between your scores is small (a few numbers off), then you can rest assured that it is likely no issue.
Since each bureau has a different calculation used to determine your score, they may differ by small amounts. They should be using the same information, however, so the scores are typically quite close.
If the difference between your scores is larger, there may be one of two issues going on. The first thing that you should check is the dates that each score was calculated.
Your credit score fluctuates each time the bureaus recalculate your score with updated information. This means that your score is a snapshot of your financial situation at one specific moment in time.
If the scores are from different dates, then consider if you’ve done anything that might cause a big change in your credit scores, like opening a new credit account or spending more of your available credit.
If your scores are not from different dates or there is no understandable reason why the scores are different, then the bureaus may have different credit information. Perhaps there is a mistake on one of your reports, like erroneous debt or incorrect payment information.
You should take a look at your credit reports and compare them to see if the information is the same. If you spot an issue, contact the credit bureau, and they may work with you to rectify the problem.
Is the Transunion or Equifax credit score better?
While they may be different, there is no inherent superiority or inferiority to any of your credit reports or scores.
While they may differ slightly, they are typically quite similar and will lead to similar results from lenders, landlords, and employers. Unfortunately, you don’t have much control over which credit score a particular individual or business uses to check your credit.
Lenders are not obligated to inform you which credit bureau they obtain their information from when you submit your application. But if you are denied credit, they are legally obligated to inform you of the score they used and the bureau they obtained it from.
They’re also required to let you know how you can get a free copy of the report they used and give information on how to dispute any errors or mistakes in the report.
How can you improve Equifax and Transunion credit scores?
Although the two credit bureaus may calculate their scores differently, they use the same information to calculate your score, which means the same strategies typically work to improve both scores.
The most important thing you can do to improve your scores is to pay off all your credit accounts on time, every time, as late payments have a serious negative impact. You should also aim to keep your credit accounts open to show a long history of good credit.
Focusing on these two things can improve your credit score over time.
How can you view your credit reports?
Checking your credit reports is an essential part of maintaining financial health, especially if you expect to take out a loan or open a new line of credit. Many people underestimate how important it is to know what’s on their report, but the truth is that it can greatly impact the type of loan and rate you’re able to get.
By staying up-to-date with what’s reported on your credit history, you can ensure that any inaccuracies are quickly corrected. Checking your credit report regularly can give you insight into the various forces at work in your finances and allow you to make confident financial decisions.
Viewing your credit reports may feel daunting, but the truth is that it has never been easier to check your credit reports from the major bureaus. In just a few minutes, you can get a free copy of your credit report from Equifax, Transunion, and Experian online.
What are the benefits of having a high credit score?
Having a good credit score has its advantages. It can open up opportunities for you to borrow money at favorable rates and establish trust with lenders and banks, potentially making them more open to providing financial assistance when needed.
Indeed, having a good credit score can demonstrate responsibility and reliability, which are strong indicators of creditworthiness that may increase your chances of being approved for loans.
The benefits are clear: The higher your credit score is, the better access you typically have to financing options with favorable advantages. All in all, maintaining a positive credit score is key to understanding your finances and staying financially secure.
Transunion vs. Equifax credit scores: the roundup
Credit scores can easily get confusing, especially if you are new to monitoring your credit. In reality, the concepts are pretty simple. Equifax and Transunion are just two different credit bureaus that compile and distribute credit reports and scores.
While these scores may differ slightly, they use the same information and should be similar. If you notice major discrepancies, check your reports and notify the bureaus of any mistakes in your report. Both scores and reports are equally valid, so make sure both are up to par.
If you are looking to take advantage of your good credit, consider applying for Vital Card. Vital is the credit card that pays you to share and spend responsibly.
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Credit Reports and Scores | USAGov
What is a credit reporting company? | Consumer Financial Protection Bureau
Why Do I Have Different Credit Scores? | TransUnion
Vital Card blog posts are intended for informational purposes only and should not be considered financial or any other type of advice.