Equifax and Transunion are two of the main credit reporting bureaus, and while they both have the same purpose, to maintain an accurate credit report and creditworthiness scoring model for consumers, they each have slightly different ways of fulfilling that purpose. Each one will collect information about your credit, recording it in your credit history, but knowing how they differ can be a powerful way of ensuring you have the opportunity to keep your credit reports in optimal health.
The major difference between Equifax and Transunion include their different credit score calculation models. In some situations where you're seeking credit or loans, the lender will have a reporting service that they prefer to use, but you as the consumer will generally not know which.
Even though the major credit bureaus contain enormous databases of credit information for more than 200,000,000 US consumers, your credit report from each of the three will be slightly different in most cases. Additionally, when they calculate your credit scores, Equifax and Transunion use formulae and criteria that are quite different from one another. These differences can be relatively significant to many people and can help consumers correct errors and repair their credit with ease.
What Is The Difference Between Transunion And Equifax
Both Transunion and Equifax keep extensive records of your credit history, and accounts and each has their unique way of scoring your creditworthiness, one important thing to remember is that they each receive their information from similar sources but compile your report according to the information they receive. This means that while they can each receive the same information from a lender, errors do happen and this can potentially negatively impact your report. The information is sent to the bureaus from the lenders or creditors and incorporated into your updated report.
Every lender will have their preference of which credit bureau their service uses to obtain consumer credit information, and none are more important or accurate than the others. Some lenders simply prefer one over another, but that doesn't mean that your credit score is going to be more accurate from Transunion for example, than Equifax. There are a significant number of variables that can become factors.
One potential difference that you may see if you consistently look at or check your credit, is that it may have more items on one report that are missing on the report from another agency. For those with several negative credit items, this can be a boon, since you'll be missing a negative item and as a result, your score will appear higher in some cases. For those whose credit report is missing one or more positive items, it can cause an unwarranted drop in their credit score.
What Is The Difference Between Transunion And Equifax Credit Score
If you've used a credit utility like Credit Karma, you've probably already noticed that you have been given two different credit scores from Transunion and Equifax. This is because not only is there the potential for differing credit report information, the scores themselves are calculated in different ways from similar criteria.
Just like the other major credit bureau, Experian, both Transunion, and Equifax use proprietary credit scoring formulas to create their scores from your credit information. All credit scores are going to be relatively similar, even when calculated from the same data, but the weight that each piece of information has can fluctuate significantly depending on the formula used. Even if you only have a single credit account in good standing, with no missed payments, your score from Transunion and Equifax will differ significantly.
On top of that, each company in the credit scoring business will be given information about your creditworthiness by your creditors, but each one may not receive the same information. This means that the difference in your credit scores may be based on sightly different information, often leading to larger variations in the scores themselves. One lender may only report to one bureau while another may report to all three, and still another may report to two of the three. This means that in most situations you will actually have three different scores at any point in time.
One more factor that may affect your scores is that you may be looking at scores that were created on different dates or updated at different intervals. Since many of the factors used to create your credit scores are time-based, like your credit history length, payment history, and more, looking at a score that was updated 3 weeks prior and one that was updated 24 hours ago can yield a tremendous difference in some cases.
How Transunion Scores Your Credit
Transunion uses a credit scoring system called VantageScore 3.0 to calculate your overall credit score. The VantageScore credit scoring model uses a scale that runs from 300 to 850, where 300 is the worst and 850 represents the highest score possible. The scores for VantageScore are similar to the scoring system that most people are familiar with, FICO, though there are some differences. With FICO, the lower bound for a credit score in the "good" bracket is 670, while VantageScore doesn't qualify a credit score as "good" until it reaches the 720-780 space.
Transunion relies on the same metrics that other bureaus use to help calculate your score, though they use them differently and apply different weights to each during the calculations. Here are the criteria that are used in the calculation of your Transunion VantageScore:
- 40% of your score is calculated from your payment history
- 21% of your score is derived from the types of credit you have
- 20% of your score is made up of your credit utilization rate
- 11% of your credit score is from your existing account balances
- 8% of your score comes from your recently applied-for lines of credit and available credit
How Equifax Scores Your Credit
Equifax scores your credit similarly to Transunion, though with a lower bottom-end for damaged or bad credit. The credit scores from Equifax range from 280 to 850. The scoring model that Equifax uses is the FICO model that many people are relatively familiar with. The "poor" credit bracket runs from 280 to 559, with "fair" beginning at 560 and reaching 659. The next credit tier is from 660 to 724 and designates "fair" credit, and scores of 725 to 759 make up the "very good" credit level. The last group is one of the hardest to reach, represents "excellent" credit, and runs from 760 to 850. The factors considered in the FICO model include:
- 35% of your score based on payment history
- 30% is based on your active credit utilization
- 15% of your FICO score is based on the length of your credit history
- 10% of the score comes from your mix of credit account types
- 10% is based on any new credit accounts
More About Credit Score Criteria
Some people may not be familiar with what these criteria mean, exactly. Others may have heard of them before and may have some level of familiarity, but want some more details. Below is more information on the 5 major criteria that are used in the calculation of FICO & VantageScore credit scores, as well as one other factor that may also impact your credit score.
Payment History
Undoubtedly one of the most important factors in your credit rating is how well you maintain the agreement to pay your debts on time, every time. Late payments are tracked, recorded, and kept on your credit report for up to 7 years.
Credit Utilization
Your credit utilization is a metric that gives a total percentage of your available credit that is currently used, with the ideal rate being 30% or less.
Length Of Credit History
Longer credit histories are better, with shorter credit histories representing a higher potential risk for the lender or creditor. This can be negatively affected by closing long-standing credit accounts but keeping newer cards open instead.
Mix Of Credit Types
The mix of credit you have plays a role in your credit score. Generally, having too much of one type of credit isn't ideal. You should have a mix of revolving accounts, like credit cards, as well as other items like a vehicle loan, personal loans, mortgage, or HELOC accounts.
New Credit
Accounts opened recently are taken into account, as well as other inquiries or credit report requests, like applications for loans or other debt. Too many new accounts or too many inquiries can hinder your credit score.
Criminal Records & Other Public Information
Even though it's not listed in the other criteria, credit bureaus are permitted to factor in any public records that may impact your creditworthiness. This includes civil judgments, criminal records, and even traffic infractions.
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Understanding How The Major Credit Bureaus' Credit Calculations Differ Is Important
One of the best ways that you can keep your credit looking good is to make sure you're as informed as possible about how your credit is viewed by lenders. This means knowing how your credit score is calculated based on the various scoring models and understanding the most important factors in calculating your credit score. Once you have that information, it becomes much easier to keep your credit looking good.
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Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.