Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes “Speaking of Credit,” a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
Dear Speaking of Credit,
I have been working on my credit for about seven months. All of my FICO 8 scores are around 700, but my mortgage scores are Experian v2 at 612, and TransUnion 4 at 645.
How can I raise these scores? Why is there such a difference? – Charles
But then, with those TransUnion 4 and Experian v2 scores so much lower – about a 78-point spread from highest to lowest – you may have good reason to feel like something isn’t right.
Yet there may be nothing wrong with your scores. You may simply be seeing your scores just doing what scores do, as part of a complicated credit reporting and scoring system made up of many moving parts.
Let’s see how such a wide range of scores can come about, assuming you’ve checked your credit reports for errors and your credit information is being reported accurately. Then we’ll address the raising of those scores.
Multiple scoring formulas
Similar to the way other software products are upgraded periodically, credit scoring formulas are redeveloped every few years based on newer consumer data and technology advances.
Changes resulting from these new “versions” or “models” typically arise from adjustments made to the number of points assigned to many of the same scoring factors present in earlier developments.
Video: FICO’s 5 credit score factors
The FICO 8 redevelopment that produced your highest scores is among the latest of these versions. Fortunately, too, these are the scores used most often for most types of credit.
However, FICO 8 is neither the most recent version, nor the one used most often in mortgage lending. FICO 9 represents the latest version, though it has not yet been as widely adopted as its predecessor.
Each FICO model can be expected to deliver somewhat different scores, even when based on the same or similar credit reports.
And then there are the Experian v2 and TransUnion 4 models that gave you those low scores. Those pre-2006 versions, that also include Equifax 5, continue to be the favorite of the mortgage industry.
Variations in credit reports across credit bureaus
All of the big three credit bureaus collect, store and provide information in much the same way.
Yet because they do so independently of each other, and because all creditors don’t report their information to each credit bureau at the same time, credit reporting inconsistencies almost always occur – whether from the same bureau or across all of them.
Such score differences can range from minor ones, such as when the number of inquiries or card balance amounts vary slightly across bureaus, to major scoring discrepancies when a late payment or collection appears on one or two, but not all three, credit reports.
Credit reports can change daily at the same bureau
A score can also vary from one day to the next at a single bureau due to several factors:
- Creditors reporting balance and payment updates affecting the two most important scoring categories – payment history and amounts owed.
- Age-related calculations, such as account age or length of time since the last delinquency, that reflect the all-powerful passage of time in a score.
- The removal of a credit reporting item, such as an expired inquiry or old delinquency.
Common reasons for a low credit score
Knowing how to rebuild your scores usually requires some knowledge about why they were low to begin with.
Not knowing enough about your situation, we’ll have to guess there’s either:
These are by far the most common reasons for low scores.
Though highly influential, high card balances can be the quickest of these problems to remedy, since “balance history” isn’t a factor – only the amount at the time of the score calculation.
On the other hand, payment history-related factors consider up to seven years of negative payment history and on-time payments indefinitely.
This is a big reason why low scores from late payments can require years to reach the heights needed for new credit approval – something that hasn’t changed in almost 30 years of FICO credit scoring.
On-time payments + paying down balances = higher scores
Unfortunately, without knowing more specifics about your current situation, it can be difficult to pinpoint the discrepancies between your scores.
The lesson for you is simply to continue patiently doing what you already appear to be doing – paying on time and lowering those card balances.
You should know, however, that it’s going to take much longer than seven months to get to where you’re going.
You’re off to a great start, though, so hang in there!
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