May 8th, 2008
More about Scores and the Differences
On a daily basis, we get several emails and questions about why a consumer’s score is different from their other score(s). These questions and confusions on credit are exactly why we developed Credit Karma. To properly answer the question, there are five things that consumers should keep in mind.
- There are three different credit bureau: Equifax, Experian, and TransUnion. Each credit score is developed with data from one of those bureaus, and each bureau may have slightly different information about a user. A majority of the information will be consistent, but the bureau used can lead to differences in scores.
- There are different brands of scores. FICO is probably the best known of the brands of scores, but FICO is analogous to Kleenex for tissue. It’s just the brand name; there are several other tissues that do the same thing. To say one is better to the average consumer is a function of their marketing and brand building. All credit scores are built from the same underlying bureau data using the same mathematical process.
- There are hundreds of credit scoring algorithms (formulas). Some credit scores predict mortgage default, others auto loan default, and some are for people with short credit history. Even within FICO, there are several different scores for different purposes.
- Credit Scores can change at any time. A score technically changes anytime the credit data files that drive it changes. Since a bureau can update your credit report at any time, your score can change at any given point.
- All credit scores are highly correlated (related). A movement within one score or bureau will often be indicative of all other scores. It’s a natural behavior of statistics and how these credit scoring algorithms are built.
For our users, we recognized that all of this information is both confusing and annoying. If you take points 1-4, there are an infinite number scores for any given consumer. To address the problem, we decided to provide one consistent benchmark into user scores. That means we use the same bureau and same algorithm. Everything is the same but time and the information on your credit file. The idea is that if your Credit Karma score changes, it means something in your file changed and your other scores probably changed as well.
I hope this is useful for our users that ask why their scores are different. Let us know what you think with comments below.
As useful as the one-credit-score is, I think your service would be much more useful to more users if you had an ‘advanced’ view, where the scores from the different credit unions are shown separately.
That is great feedback. Our goal is to build the right tools around the single score. Perhaps we can address multiple bureaus at that point.
I agree about showing an advanced view of all credit scores. By the way does CK use Transunion credit cores?
“we decided to provide one consistent benchmark into user scores. That means we use the same bureau and same algorithm.”
Well al righty then, you getting close. Now just tell us which “same bureau” your using and we’ll all sleep better tonight.
TransUnion
It’s unfortunate you use TransUnion since, in my experience, they are the least accurate of the three. Equifax seems to be more up to date and the faster as correcting data when a dispute is filed. Another nice addition would be to show the different models for comparision. In other words, show what a mortgage default model would look like compared to an auto loan default, etc.
Thanks for the comment.
Having worked in lending for a number of years, accuracy is fairly consistent across the three bureaus over the entire population. However my past experience shows that certain bureaus have better coverage or accuracy in certain geographies. So you are right in that regards.
As for the models, maybe we can get there one day. Right now consumers are just confused about the existing models so our focus is on education one at a time but I think you make a great point.
If what the general consumer, like me, is looking for is the standard creditor score, like one you’d get when buying a house; then how about a “standard” variance between the score generated by CK and each of the three CRA’s? That way, the consumer could easily get the CK score, and “adjust” it to approximate each of the CRA scores. That would be way cool.
Transunion says my credit score is 989 out of a possible 990. Experian says my credit score is 990 out of a possible 990.
Credit Karma says my credit score is 794 out of a possible 850.
I haven’t checked the third agency because I don’t want to waste all of my free reports for a year in one day, and I don’t think I can pay for a score without also getting my free credit report.
But why have the Experian and Transusion agencies switched from FICO to another system where you have a perfect or near-perfect score? I seem to remember Experian at one time rating me at 805 out of 850, but their tools that allow you to see how to improve your score did not show me how I could improve my score from there. What would you have to do if you wanted to score 840 out of 850, for example? Such information seems to be in short supply, and I have a feeling they’re holding back certain information.
Excellent question Fred!
There are several reasons why the bureaus are moving to the Vantage score. Money and control are probably the top reasons. As the name suggests, FICO was created by a company called Fair Isaacs (Company). FICO is an independent company not controlled by the credit bureaus. FICO charges the bureaus/lenders a premium every time a FICO score is run.
In a response to the FICO premiums, the bureaus developed a new competing score called Vantage. In this case, the model was developed in collaboration. Hope that helps.