The common question among people is, why do credit scores vary from one bureau to another? There are various credit bureaus in India, and you can get your credit score directly from these bureaus. Some companies too have tie-ups with the credit bureaus, so one can also check credit scores through these companies. Nowadays, people have started checking their credit scores whenever they want to apply for any debt. But when it comes to checking the credit score, one gets confused about why the credit score varies from one bureau to another. The algorithm and scoring model of different bureaus can be the reason for the variations.
Why Credit Scores Vary From Bureau To Bureau:
Scoring Model And Algorithm
Each credit bureau has its own way of working, which means they have a different algorithm and way of calculating the credit score. For example, if a person checks his credit score on Equifax and CIBIL and finds different credit scores. He found decreasing 10 points in skipping EMIs from Equifax while, on the other hand, CIBIL gave an algorithm of decreasing 7 points in skipping EMIs. It's clear that the scoring model is different from each other. The credit scores are calculated based on five broad factors that are the length of credit history, credit utilization, repayment track record, number of recent credit injuries, and mix of secured and unsecured credit. Each credit bureau uses its own way of logic, models, and algorithms. A credit bureau may assign a credit score to a thin-file customer with a short history of four months. Credit bureaus, over a period of time-release the newer versions. For example, TU CIBIL is now on version three of its credit scoring algorithm. However, there is a possibility when the credit score differs - what you see through your own access versus how a bank sees a different credit score.
There Are Other Reasons Also That Are Responsible For The Credit Score Variation:
A Time Gap In Sharing The Information
What do the banks and the lenders do? They share your repayment history and debt managing patterns with the credit bureaus, but a certain time gap exists within which they have to share all the information. The time gap may vary from lender to lender. So, when one checks your credit score during the month, Equifax doesn't have the information while CIBIL has all the updated information. This also is responsible for credit scores varying from one agency to another.
Information Shared By Lenders Or The Bank To Bureau
Generating your credit score starts by sending the information from the lender or the bank to the bureau. Based on which the customer's credit score is generated. The credit bureau takes data from the bank; the number can vary; it can happen because credit bureau" A" takes the information from the 18 banks and the credit bureau "B" takes the information from the 20 banks only. So, in that situation, bureau "A" has skipped two banks and doesn't have the record of those customers, whereas bureau B calculates the credit score including those two banks. That's why the credit score varies from bureau to bureau.
Linked Phone Numbers
Many people have two phone numbers, and they use both their numbers equally. Sometimes while filling the information in the application, there can be a mismatch in your phone numbers registered with the credit report agencies. That can also create fluctuation in your credit score. Suppose you have registered one number with Equifax and another one with Experian. It is obvious that Equifax will fetch the information of the first number while Experian will fetch details from another number. There will be a difference in the credit score from the different agencies.
How To Deal With Different Scores From Credit Bureaus?
You may end up getting different credit scores from different bureaus. The point to understand is the difference is not on account of credit bureaus looking at the data differently, but the difference is in the way of looking at the data. Actually, the score doesn't vary widely. Basically, a credit bureau looks at five different parameters to generate the credit score. Payment history, total credit, new credit, demographics, and length of credit history. Each credit bureau gives different weightage to these parameters, leading to minor 5-10 percent variations. If someone finds the higher variation, it can be due to account-related problems like a credit card or loan that doesn't belong to you, late repayments, closed account listed, etc.
If a person applies for a loan and the bank or the lender refuses his application because he doesn't meet the laid down criteria. The customer never reveals the bureau's name from where he collected his credit score. In such cases, experts advise that person to download reports from four other agencies and compare the score. If the credit score varies more than 50 points, then go through each loan data and the credit card data that the bureau has captured.
Credit scores can be higher as you have a longer track record of repayments, or they can be lower when you have been a defaulter for many years. So, an individual has to sort out the discrepancy on his own. In case of discrepancies in the credit report or when a person meets a situation where his identity has been stolen, he should intimate the bank immediately and report the same to the credit bureau. In these cases, the credit bureau provides the consumers with the option to resolve the dispute in their credit score. For any error, they should request the changes with the appropriate documents, and the bureau will work with the bank to correct the relevant information. The process of updating the credit information should be done within 30 days after receiving the request from the customer.
Some Basic Things To Consider If You Are Concern About Your Credit Score
Which Credit Score Should You Follow? - As we all know nowadays, a credit score measures the risk factor for having loans or credit cards. If you have a good credit score in one bureau, it's obvious that you will have good in another one. For example, if you are applying for a credit card from the bank, then they will fetch all the information like CIBIL credit score and the credit report, but if you are applying for a loan from any lending app, then they will prefer fetching your Experian credit score and credit report. Banks and financial institutions have different criteria to approve or disburse loan applications.
Which Credit Score Is Best? – People always ask this question, but it's evident that there is no best credit score. Each bureau provides a credit score of 300-900 as per its own algorithm. Just try to be right on your behalf, like repayments on time, and always remember the time scheduled for the repayments.
How Do You Know Which Credit Score Is Accurate? - Each agency gives you access to your report once every 12 months. If we talk about the credit bureaus in India, there are three major credit bureaus, and you can log in to the annual credit report to check your report for free. You will have to pay them if you want your credit score. When you check your credit report from the top bureaus then no need to worry about some fluctuation of 5-10 points.
Is There A Need To Worry?
There is no need to worry when you have the correct credit report and find that your credit score differs between the credit bureaus by 30-50 points. The banks and the agencies are trained to alter all the thresholds. If you have inaccuracies in your credit score, you must write to the credit bureau and the lender to seek correction in your data as soon as possible. The best way to be updated on your credit score is to check your credit report and credit score at least three times a year. Go to the credit bureau with all your problems which will help you uplift your credit score with their expert advice. Never act like an ostrich ducking its head in the sand.
We have seen several reasons why credit score varies from one bureau to another. A credit score gives you a clear picture of your credit history and how you manage your debts. So, if you find a difference of 30-50 points in the credit score when checking from a different bureau, then it's perfectly ok. This can happen due to the reasons mentioned above, so it's better to check for errors. The point is before you apply for a loan or a credit card, it's essential to go through all the credit scores and the credit report that you can do from two to three bureaus.