If you check your credit report, it is possible to notice a big difference in the score. 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. Any errors can be fixed by working directly with either the creditor, or the credit bureau.
There are a variety of different scoring models used by different credit reporting agencies. Each one weighs information differently. FICO is the most commonly used scoring model. VantageScore can also be used to calculate a score, but it requires more data.
The Consumer Financial Protection Bureau recently found that creditors can give consumers significantly different scores. This is due to companies not reporting to all three of the main credit reporting agency (CRAs), in the United States. Because CRAs use different scoring methods and rely upon different types of financial information, this is why it can be difficult for companies to report to all three national credit reporting agencies (CRAs) at once.
A study by the Dodd-Frank Act prompted the Consumer Financial Protection Bureau to perform a number of studies that explored the various differences between credit scores and other similar functions. They were not designed to determine whether or otherwise credit rating agencies are trying to fool consumers through their scoring systems. However, the results were very interesting.
FICO is the most basic credit scoring method. This is the score that you most likely will see in credit reports. The score represents your credit history, usage, or other information that helps lenders assess whether you are a high-risk borrower. Creditors use the score to determine your likelihood of defaulting on your debt. The score can change from one bureau or another.
VantageScore has a similar scoring method. This model focuses more heavily on how much you've borrowed and used credit cards. The scoring model weighs your credit history using a range of factors including your credit length, recent payments and the type of debt that 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 could also be affected depending on the state of the economy or how many people live nearby. People living in metropolitan areas tend have more positive credit behavior and are generally more financially stable.
A consistent reporting pattern is one of the best ways to improve your score. Contact your creditor immediately if you are not able to get your credit limit reported to all three credit bureaus. The credit bureaus should be able and willing to correct the mistake, although it may take some time.
There are many other factors that could affect your score. You should check your credit report for errors, such as past names, loan amounts, and credit cards in your name.