You may notice a significant difference in your credit score when you look at your credit reports. It isn't necessarily a sign that you are having financial difficulties or have bad credit behavior. There are a few possible reasons that your score might be higher than it should. In most cases, the differences are caused by errors and/or differences in reporting. You can correct any errors by talking directly to the creditor and the credit bureau.
There are a variety of different scoring models used by different credit reporting agencies. Each model weights information differently. FICO is the most popular scoring model. Other models include VantageScore, which uses more data to calculate a score.
The Consumer Financial Protection Bureau recently found that creditors can give consumers significantly different scores. This is due to the fact some companies don't report to all three national credit reporting agencies. It's because CRAs use a variety of scoring models and rely heavily on different types financial data.
A Dodd-Frank Act study prompted the Consumer Financial Protection Bureau (CFPB) to do a variety of studies to examine the different credit scores and other similar functions. While they were not specifically designed to determine whether or not credit rating agencies are purposely trying to fool consumers with their scoring systems, the results were pretty revealing.
FICO is a basic credit scoring system. This is the score you will likely see in most 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 use the score to determine your likelihood of defaulting on your debt. The score can change from one bureau or another.
VantageScore has a similar scoring method. This model focuses more heavily on how much you've borrowed and used credit cards. The scoring model weighs your credit history using a range of factors including your credit length, recent payments and the type of debt that you have.
There are some interesting differences between urban and rural consumers in credit scores. The average credit score in both the urban and rural groups is quite different. These scores may be affected by the local economy or population. Urban areas are more financially secure than those who live in the metropolitan areas.
A consistent reporting pattern is one of the best ways to improve your score. Contact your creditor immediately if you are not able to get your credit limit reported to all three credit bureaus. The credit bureaus should be able and willing to correct the mistake, although it may 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.