Your credit report may show a marked difference in your score. This does not necessarily mean that your credit score is low or you have been in financial trouble. There are some reasons your score might be higher or lower than you should. The majority of cases have their roots in errors and/or reporting differences. You can fix any errors by working directly with the creditor or the credit bureau.
Different credit reporting agencies use different scoring models. Each one weighs information differently. FICO is the most popular scoring model. VantageScore can also be used to calculate a score, but it requires more data.
A new study by the Consumer Financial Protection Bureau has found that consumers can receive significantly different scores from their creditors. This is due to some companies not reporting to all three main credit reporting authorities (CRAs) in the country at the same time. The reason is that CRAs use different scoring systems and rely on various types of financial data.
A Dodd-Frank Act-related study prompted Consumer Financial Protection Bureau research that looked at the differences in credit scores. Although they weren't specifically intended to determine if credit rating agencies were intentionally trying to trick consumers with their scoring systems or not, the results were quite revealing.
FICO is the most basic credit score system. This is the most common credit score that you will see on your credit reports. Generally, this score reflects your credit history, usage, and other information that helps lenders decide if you're a good or bad 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, a scoring model similar to the one used by VantageScore, focuses more upon how you have made your loans and credit cards over time. This scoring model considers a number of factors, such as the length of credit history, payments made recently, and the type of debt you have.
It is interesting to see the differences in credit scores between rural and urban consumers. While both groups have the same basic credit rating system, the average credit score is considerably lower in the former. The local economy and the population may influence these scores. Urban areas are generally more financially secure, and those living in metropolitan areas tend to have more favorable credit behaviors.
A consistent reporting pattern is one of the best ways to improve your score. Contact your creditor if they fail to report your credit limit on all three credit bureaus. The credit bureaus should be able and willing to correct the mistake, although it may take some time.
Other factors can also affect your credit score, such as a credit card account not reported to credit bureaus. Check your credit reports for errors.