When checking your credit scores, you might notice discrepancies between the numbers provided by different credit bureaus or financial institutions in Canada. This can be confusing, especially when you’re trying to understand your creditworthiness. So, why do I have different credit score? In this article, we break down why you might see different credit scores, how to navigate them, and what they mean for your financial health.
Different credit bureaus means different models
Canada has two primary credit bureaus: Equifax and TransUnion. These agencies collect and maintain your credit information, but they do so independently. Each bureau has its own method for calculating credit scores, which can lead to different outcomes. Equifax and TransUnion may weigh certain factors differently, such as your payment history, credit utilization, and length of credit history. The data each credit bureau receives can also vary. Not all lenders report to both bureaus, so one bureau might have information that the other does not.
Credit bureaus use different scoring systems
Credit scores aren’t calculated using a single, universal formula. Instead, there are multiple scoring models in use today. Even within the same credit bureau, you might see variations depending on the scoring model applied. The two most common scoring models are FICO score vs VantageScore. FICO scores are often used by lenders to assess risk, while VantageScore is another popular model that might be used by credit monitoring services. Each uses slightly different criteria, which can lead to different scores. On the other hand, some lenders use custom scoring models tailored to specific industries or products. These scores might focus more on factors relevant to auto loans, mortgages, or credit cards.
There may be a delay in updating your credit score
Credit scores are not static; they change as new information is added to your credit report. The timing of these updates can lead to temporary differences in your credit scores. If one credit bureau updates your information sooner than the other, you might see a difference in your scores until the second bureau catches up. Each time you apply for credit, an inquiry is made on your report. Inquiries can cause a small, temporary dip in your score. If the inquiries are recorded at different times by different bureaus, this can create a short-term discrepancy.
There may be errors and omissions on your credit report
Sometimes, differences in your credit scores can be attributed to errors in your credit report. This can include incorrect information, whereby mistakes like a wrong account balance or an account that doesn’t belong to you can negatively impact your credit score. If one bureau has this incorrect information, your score with them might be lower than with another bureau. You might also encounter discrepancies in reporting, where lenders may report your information inaccurately to one credit bureau but not the other. This can create differences in your credit scores.
Different lenders have different criteria
The credit score you see can depend on who is pulling it and why. Lenders might request different versions of your credit score depending on the type of credit you’re applying for. Hard vs soft inquiries, for instance, can reflect different scores. A hard inquiry (like when applying for a mortgage) might generate a different score than a soft inquiry (like checking your score for personal reference). Some lenders also use industry-specific credit scores tailored to assess risk for certain types of credit, such as auto loans or credit cards. These can differ from your general credit score.
How to manage different credit scores
Understanding that it’s normal to have different credit scores is important, but there are steps you can take to ensure your scores are as accurate and favourable as possible:
- Regularly check your credit reports: obtain your credit reports from both Equifax and TransUnion regularly to ensure all the information is correct.
- Dispute errors promptly: if you find any discrepancies or errors, dispute them with the relevant credit bureau to have them corrected.
- Pay your bills on time: your payment history is one of the most significant factors in your credit score. Always pay your bills on time to maintain a healthy score.
- Keep your credit balances low: aim to use less than 30% of your available credit. High credit utilization can negatively impact your score.
- Limit hard inquiries: too many hard inquiries in a short time can lower your score. Only apply for new credit when necessary.
Why do I have different credit scores? FAQs
Here are some of the most common questions we receive about having different credit scores in Canada:
Why are Equifax and TransUnion scores different in Canada?
Equifax and TransUnion scores differ in Canada because each bureau uses its own scoring model and may receive different information from lenders. They weigh factors like payment history, credit utilization, and account age differently, and not all lenders report to both bureaus. Timing of updates, errors, and discrepancies in the data reported can also contribute to variations in your scores. This is why you might see different credit scores from Equifax and TransUnion.
Are credit scores different in Canada?
Yes, credit scores can differ in Canada because they are calculated by different credit bureaus – mainly Equifax and TransUnion. Each bureau uses its own scoring model and may receive varying information from lenders, leading to differences in how they evaluate factors like payment history, credit utilization, and the length of your credit history. Additionally, the timing of updates and any discrepancies in reported data can cause variations in the credit scores provided by these agencies.
What determines credit score in Canada?
In Canada, your credit score is determined by several key factors:
- payment history, which tracks whether you pay your bills on time;
- credit utilization, which is the amount of credit you’re using compared to your total credit limit;
- length of credit history, or how long you’ve had credit accounts;
- types of credit you have, such as credit cards, loans, or mortgages;
- and recent credit inquiries, which occur when lenders check your credit report.
These factors are analyzed by credit bureaus like Equifax and TransUnion to calculate your credit score.
How can I get an accurate credit score in Canada?
To get an accurate credit score in Canada, request your credit report from both major credit bureaus, Equifax and TransUnion. Since each bureau may have slightly different information, reviewing both reports gives you a complete picture. Regularly check for errors or discrepancies and report any inaccuracies. Additionally, consider using a credit monitoring service that provides scores from both bureaus. Keep in mind that scores can vary depending on the model used, so focusing on maintaining good credit habits – like timely payments and low credit utilization – will help ensure your score is accurate and strong.
While it can be confusing to see different credit scores from different sources, understanding the reasons behind these variations can help you make informed decisions about your financial health. By staying proactive about your credit and addressing any discrepancies, you can ensure your credit profile accurately reflects your financial responsibility. For more personalized advice on managing your credit, book a free no-obligation consultation with an experienced Licensed Insolvency Trustee at Spergel today. We’re here to help you navigate your financial journey with confidence.