Specifically, the fact that a good credit score is significant to you has always been said. Credit score simply refers to a three-digit figure that helps credit providers estimate how credit-worthy a borrower is in terms of repaying the credit on offer. It is important to note that there is not just one company that computes credit scores; however, the major ones are TransUnion, Experian, and Equifax. Understandably, two different companies may give different credit scores to the same client. You might be wondering which of these two, TransUnion or Experian, usually reports a higher score.
In this regard, there is little disparity between the TransUnion and the Experian scoring models, meaning that one can easily approximate the other. However, here is some background on both scoring models as well as some reasons why one score could be higher than the other:
TransUnion Scoring Model
TransUnion employs the scoring model known as VantageScore, which has been created in collaboration with such credit bureaus as TransUnion, Experian, as well Equifax. The VantageScore model produces scores in a range that is between 300 and 850, which is the same range used by FICO scores – the most popular credit-score model. The formula it employs to produce the scores is the same as those it employs for other factors. A higher VantageScore means that a client is less likely to default in the repayment of the loan as they present lower credit risks to the lenders.
Some key factors that influence your TransUnion VantageScore include:
- Financial habits – Whether one pays one's bills on time. This is usually the main reason which may be backed up by any of the two or all of them depending on the specific case.
- Credit utilization – This is the amount of credit that has been used by the cardholder as a percentage of the total credit allowance. Avoiding or decreasing the consumption of a product also contributes to a higher ranking.
- Number of opened credit lines and credit mix - This factor presents the total number of credit cards and loans, as well as the proportion between credit cards and loans. This means more diversification helps raise scores.
- Credit application rate – Getting new credit frequently decreases scores.
- Credit utilization ratio- This means maintaining low balances as a proportion of your available credit will increase scores.
Experian Scoring Model
The credit scoring system in the Experian credit scoring model comprises FICO scores, the scores designed by the Fair Isaac Corporation and widely utilized by lenders that make over ninety percent of lending decisions. Like the VantageScores, FICO scores are also represented in a range of 300-850. Lenders favor those clients with higher FICO scores when it comes to the issue of credit.
The factors that make up your Experian FICO score include:
- Bills timely repayment – whether the bills are fully paid or paid in part.
- Credit utilization ratio used - that is, the extent to which a borrower is utilizing his or her line of credit.
- Credit history - History of credit accounts: Credit accounts opened for a long time.
- Types of credit used – credit cards and/or accounts – guarantees and/or other types of credit.
- Credit applications – If you have recently applied for credit that has been rejected severally or you have applied for many credits then chances are that your scores will be low.
- Number of accounts with balances – Like in the case of credit scores, having more accounts with balances can also bring down the scores.
In other words, both TransUnion VantageScores and Experian FICO Score are, as a matter of fact, very similar in terms of the aspects that they consider – the only significant difference lies in the formulas and the models used to calculate these aspects.
How and Why One Score May Be Higher
While the TransUnion and Experian scores are typically very close, there are a few reasons why one score could come out higher than the other, including:
- They may have different information: The reason is that if one bureau has negative data that is wrong or old while the other bureau does not have the same negative information then there is a disparity.
- Differences in scoring models: Thus, for the same information, the algorithms used by their ranking systems may assign different importance to these factors, so the scores can be different.
- Credit usage changes: If the rates at which you have been reporting your credit card or loan utilization to the bureaus are not uniform, then you could be seeing different points.
- One company is slower to update: It can happen that one company may not reflect the payments you made or the error corrections that you made within the last few days.
Nevertheless, if a person has a difference of greater than 50 points between TransUnion and Experian reports, they should investigate further because that could be a sign of some illegitimate information or identity theft.
Although there are distinctive differences in the scores you get from the different credit bureaus, in most cases, the scores are likely to be close in value. It is recommended to check all your scores as it provides complete insight - no company particularly stands out as offering either higher or lower scores. The average scores indeed are found to blend over time with responsible credit management.
Some of these tips that can help in improving the scores at TransUnion or Experian include the following;
If your credit score is lower than you would like from TransUnion or Experian, here are some tips that could help give it a boost over time:
- Finally, ensure all the bills listed above are paid in full henceforth – this can be done automatically if necessary.
- Reduce the total outstanding amount for loans that are considered revolving such as credit card debts and line of credit.
- Marry credit inquiries with the need to apply for credit only when necessary
- Use credit forms after deciding between the two – perhaps integrate installment loans or credit cards.
- It is important to stay as long as possible – the duration of a positive history assists
- Examine the content of the fake news and dispute any mistakes by providing factual information to counter the negative information spread.
The most critical things are to pay on time, use minimal credit cards, and avoid applying for credit where you do not need it. The scores tend to go up as with any other responsible action that is taken in the course of following the rules and regulations. If you check the credit reports and the scores frequently, you will be able to note any problem at an early stage - and know whether TransUnion or Experian scores are more or less.
Knowing what affects scores enables one to proactively act to maintain, improve, or manage them. There is no reason scores on both TransUnion and Experian cannot keep going up with equal consistency if you practice patience and work on building a positive credit history.
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