The two main credit bureaus, TransUnion and Equifax, as well as how they differ from one another, will be discussed in today’s post. We’ll try to clear up some ambiguous facts surrounding this subject because it’s crucial, especially if you’ve ever wondered why you occasionally see slightly different numbers when you read your credit reports.
To begin with, you will see that the credit scores can differ when you pull your Equifax and TransUnion credit reports. We will highlight some key differences between Equifax and TransUnion’s calculation algorithms and break both down to give you a clearer sense of what each reflects in order to assist you in better comprehending the discrepancy in these scores. There is a lot to discuss, so let’s get started.
What Do Credit Scores Actually Mean?
Credit scores are a set of data that lenders use to assess the risk involved in extending credit to its clients. Everyone has more than one credit score because it is based on their credit report and is determined by the three major credit reporting agencies, TransUnion, Equifax, and Experian.
Although some lenders choose to utilize proprietary scoring models as well, it is more typical to deal with lenders who use the credit reports from one of these three credit reporting companies. A credit report offers details on a person’s financial situation, including:
- Payment history
- Outstanding balances
- Length of credit history
- Applications for new credit accounts
- Types of credit accounts
Additionally, it is crucial to note that every consumer has a right to free annual access to their credit reports from each of the three major credit bureaus.
How Come My Credit Scores Vary?
The largest credit bureaus, TransUnion and Equifax, along with Experian, keep databases with data on more than 220 million Americans. Your credit score differs between credit bureaus, as we previously stated.
The main distinction between these two businesses and how they offer the final scores is that, while Equifax and TransUnion use the same elements to determine credit scores, these factors are assessed using various credit-scoring methodologies.
Another reason why the scores can occasionally differ is that the major credit bureaus do not always receive the same information from creditors and lenders. It’s also important to keep in mind that certain creditors and lenders only focus on ratings that highlight information pertinent to a particular industry, while others choose to combine scores from TransUnion, Equifax, and Experian.
In order to make things clear, we identified three key factors that allow your credit ratings from Equifax and TransUnion to differ.
1. Different Credit-Scoring Models
Although credit scores are based on similar or the same factors, such as payment history and the number of accounts in good standing, all credit-scoring agencies, including TransUnion and Equifax, use proprietary scoring models, and each model can weigh some of these factors in a different way.
2. Various information may be held by the credit bureaus
Since some lenders might submit information to all major credit agencies while others might just do one or two, it’s possible that the credit-reporting organizations don’t have all the information they need about you. It’s vital to keep in mind that lenders may transmit reports at different times, so TransUnion may have more recent changes than Equifax and vice versa.
3. You May Have Results from Various Dates
A credit score is nothing more than an instantaneous picture of your credit profile. It is crucial to compare ratings from the same time period when comparing them with scores from other credit agencies because credit scores can fluctuate over time.
Equifax vs. TransUnion: How Scoring Models Are Calculated
As we’ve already mentioned, Equifax and TransUnion use distinct scoring models, and they evaluate the scores in various ways. We detailed the steps that each bureau takes in this procedure in the section that follows.
TransUnion’s Vantage Score Scoring Model
|Length and Type of Credit||21%|
|Total Credit Balance||11%|
|Recent Credit Behavior||5%|
|Very Poor||300 – 499|
|Poor||500 – 600|
|Fair||601 – 660|
|Good||661 – 780|
|Excellent||781 – 850|
Equifax’s Scoring Model
|Payment History||35 percent|
|Credit Utilization||30 percent|
|Credit History||15 percent|
|Credit Mix||10 percent|
|New Credit Accounts||10 percent|
|Poor||280 – 559|
|Fair||560 – 659|
|Good||660 – 724|
|Very Good||725 – 759|
|Excellent||760 – 850|
What data are required to determine credit scores?
To calculate credit ratings, TransUnion and Equifax each need a variety of metrics. We compiled a summary of the crucial pieces of information that these bureaus need in order to calculate your credit ratings.
1. History of Credit
When determining your score, credit reporting bureaus must consider the entirety of your credit history. Your missed payments, an excess of loans, and pretty much any other indication that there may be a financial danger will usually be taken into consideration.
2. Credit Usage Rate
The amount of revolving credit you use is referred to as your rate of credit consumption, which is crucial in these calculations. It represents how much credit from credit cards and other lines of credit you have already used.
Simply expressed, the worse it will affect your score, the larger the ratio of your used credit to available credit. Generally speaking, if you want to maintain a good credit score, you should keep your credit usage percentage under 30%.
3. Payment Record
One of the most important factors in maintaining a healthy credit score is making payments on time. Your credit score may quickly drop if you skip or make late payments, which will affect your ability to obtain credit.
4. Credit Checks
Your credit report will be updated whenever you submit an application for a loan, credit card, or any other service that requires one. Lenders need to know this piece of information in order to determine whether or not you frequently use credit. Your credit score declines as more recent queries are added to your credit report.
However, these inquiries only have a substantial influence for two years and are still recorded on your credit report.
5. Public Documents
Public records can seriously harm your credit file, particularly if a lender is suing you for loan default, a court-filed bankruptcy, or any other unfavorable filing. It is crucial to keep an eye on these data since discrepancies and inaccurate information may be a symptom of identity fraud.
This is crucial if someone takes your identity, uses it to apply for credit, and then fails to make payments. If this happens, false public records may eventually end up on your credit report.
Which Credit Report is More Accurate, TransUnion or Equifax?
First and foremost, it’s crucial to note that credit ratings are calculated using a variety of scoring methods, all of which by their very nature are subjective. Both models—Equifax’s using a rating system akin to the FICO, while TransUnion is using VantageScore—are subjective and what the credit bureaus refer to as “educational” models.
One thing is for certain: FICO is typically a better option if you’re looking for the scores that lenders will probably use to determine whether or not to grant you loans or credit lines.
In general, what credit score do lenders use?
The scores provided by TransUnion and Equifax are not something that lenders frequently utilize, and they rarely use them, according to the Consumer Financial Protection Bureau. These ratings are referred to as “educational credit scores” and are therefore designed for use by customers for instructional reasons.
Additionally, you can find information on Equifax’s official website that makes it very apparent that lenders will not use their scores to determine a customer’s creditworthiness because they are designed to give consumers a more accurate view of their credit situation.
According to a number of trustworthy sources, 90% of lenders in the United States assess consumer credit using FICO ratings before making a loan decision. The FICO 8 model is the one that credit card firms use most frequently for this reason, however Vantage Score is also employed by some businesses.
It is also crucial to note that there are several FICO scores, and that lenders may choose to use different FICO score versions to assess your credit risk based on the sort of credit you desire. For instance, credit card companies are likely to use FICO 8 or FICO Bankcard scores, whereas lenders are more likely to use FICO vehicle Scores if you want a vehicle loan.
What Do Equifax and TransUnion Have to Offer in Terms of Credit Scoring and Reports?
In addition to credit scores and reports, these credit bureaus have a variety of special services designed to give customers a better understanding of their credit as well as defense against fraud and other things that could hurt their finances.
All members of TransUnion get unrestricted access to credit scores and reports that are updated daily, and membership costs 24.95 USD per month. Finally, all members receive TransUnion’s product, Credit Lock Plus, which enables each person to lock their TransUnion report. They also receive recommendations and guidance to help the members’ credit ratings.
Equifax, on the other hand, charges 9.95 USD per month for membership, and all subscribers receive credit report monitoring, daily access to the VantageScore credit score that we previously mentioned, daily assistance from an ID restoration specialist to help subscribers recover from identity theft, and finally, up to 500.000 in identity theft insurance.
As you can see, both bureaus provide comparable advantages and services to their members, thus selecting one of these will undoubtedly be successful. However, it is best to choose Equifax if one of your top priorities is to stay protected and secure from risks like identity theft.
How Credit Bureaus Collect Your Data
It’s likely accurate even if you can’t remember granting the credit bureau permission to build a credit file about you, but that’s not how the agencies operate. They typically obtain information from the businesses you owe money to, and they voluntarily provide this information with the bureaus, in order to open these files.
These facts will always be shared with bureaus by organizations like lenders, banks, credit card issuers, collection agencies, and similar ones. They do this for a number of reasons, but one of the main ones is that it offers the company’s clients more incentive to pay their obligations in full and on time.
However, it’s crucial to keep in mind that credit bureaus are obligated to abide by both federal and state rules. Having said that, you should also be aware of the regulations in place to protect you when you become irate about the fact that credit bureaus are permitted to gather private financial information without your consent.
The Fair Credit Reporting Act, which was created to safeguard consumers and control what consumer reporting companies are permitted to do with regard to your information, is the law that bureaus must abide by on a fundamental level. We strongly suggest that you take the time to read this 100-page statute in its entirety because it serves to safeguard you.
1. Why might TransUnion and Equifax scores vary?
Since these bureaus may employ various algorithms and have access to various pieces of data, these scores may vary. These scenarios could lead to possible reporting inaccuracies.
2. What should I do if I find a mistake on my credit report?
To remedy the issue, you must first get in touch with your credit issuer. Depending on which service you use, you can also file a complaint with TransUnion or Equifax.
3. Is it possible to obtain a free credit score?
You can annually check your credit score with TransUnion and Equifax for free, and both bureaus offer this option. Additionally, you can benefit from free programs like Credit Karma and Borrowell.
It’s also crucial to note that Credit Karma receives its credit scores from TransUnion, whereas Borrowell receives its scores from Equifax.
4. Is TransUnion more reliable than Equifax?
Equifax and TransUnion both have their own scoring methodologies, therefore their scores are equally accurate. Both credit agencies provide accurate scores, and whichever your lender opts for will provide suitable information.
The main difference between TransUnion and Equifax is that they utilize different algorithms to compile credit reports, but both will carry out their duties and deliver exact information when it comes to accuracy and dependability.
Having said that, your score is still extremely accurate even if TransUnion and Equifax’s numbers differ because they calculated it using separate algorithms. Check out some of the top credit cards available if your credit score is 600 in our in-depth and thorough post.
We regularly update our content on money, so feel free to check back with us to learn about recent developments.