Quarterly Staff Column: Credit Score Models

When you think of your credit score, you might think of it as a single number. Your score may change over time, but it’s always just one number, right?
Actually, no.

Credit scores are calculations based on your credit report. However, institutions use different models to calculate your score, typically using ones that are most applicable to the industry and services they offer. In fact, dozens of different models have been developed since the 1990s. That means that depending on which model is being used, your score may be different from one place to another.

Further, institutions use a credit bureau to access your credit report, which is then used to calculate your score. However, the three major credit bureaus (Equifax, Experian, and TransUnion) may not have the same credit report data. That can occur when some of your credit history is not reported to all three credit bureaus. Therefore, even if you’re using the same credit score model, your score from Equifax may still be different from TransUnion.

To make things more complicated, each model has their own range of scores. Typically, ranges are either from 300–850 or 250–900. So, in theory, a 750 score using one model and an 800 score using another model could represent the same credit quality. In either case, the higher the score in their range, the better your credit.

The good news is that variances in your credit score are not typically substantial. It is also important to recognize that variances don’t necessarily mean something is wrong with your credit report. However, if you see wide variances in your credit scores it may be worth reviewing your credit reports for accuracy. Members can access a free copy of their credit report from each credit bureau by visiting annualcreditreport.com.

Benjamin Sheridan