You may notice a significant difference in your credit score when you look at your credit reports. It's not necessarily an indication of bad behavior or financial distress. However, there are a few reasons why your score could be a bit higher or lower than it should be. Most cases are due to errors or differences in reporting. You can fix any errors by working directly with the creditor or the credit bureau.
There are a variety of different scoring models used by different credit reporting agencies. Each model weights information differently. FICO is most common. VantageScore can also be used to calculate a score, but it requires more data.
According to a new study from the Consumer Financial Protection Bureau, consumers can get significantly different scores from creditors. This is largely due to the fact that some companies do not report to all three of the nation's main credit reporting agencies (CRAs) at once. This is because different scoring models are used by CRAs and they rely on different 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. The results of these studies were very informative, even though they were not intended to reveal whether credit rating agencies intentionally try to fool consumers by using their scoring systems.
FICO is the most basic credit scoring system. This is what you'll likely see in your credit report. This score is generally a reflection of your credit history and usage. It also helps lenders determine if you are a good risk. Creditors regard the score as a measure for your risk of not being able to pay off your debt. It will vary from one bureau.
VantageScore is a similar scoring system. It focuses on the amount of your credit card and loan payments over time. This scoring model considers a number of factors, such as the length of credit history, payments made recently, and the type of debt you have.
The most striking difference in credit scores between urban and rural consumers is the one that's most surprising. Although both have the same credit rating system, the average credit score for the former group is much lower. These scores may also be influenced by the local economy and population. Urban areas are generally more financially secure, and those living in metropolitan areas tend to have more favorable credit behaviors.
You can improve your score by making sure that you report consistently. If your creditor fails to report your credit limit to all of the three credit bureaus, you should contact them. They should be able to fix the error, but it can take some time.
There are other factors that can affect your score, including a credit card account that is not reported to the credit bureaus. Your credit report should be checked for errors like past names, loan amounts and credit card accounts.