You check your credit reports regularly.

You decide to get your scores a few months before you go in for that loan application.

You find out some of the items on one credit report are not on the others AND none of your credit scores are the same as the ones from the other credit bureaus.

WHY??

Well, you are absolutely right – it makes no sense.  You pay all your bills on time to each of your creditors, why are there three different reports and scores?

The three credit bureaus are independent, for-profit, companies.  They are not government agencies.  They charge their ’subscribers’, companies with consumer accounts, to report their customers’ information each month.  By the way, there is no law mandating that companies report our account information; the entire credit reporting and scoring system is voluntary and was developed by the financial industry for their own purposes.

Each of the credit bureaus then has their own scoring formula(s).  They each have a version of the FICO scoring system because that is the one most lenders request for their lending decisions.  And they each have their own proprietary score that they can sell to consumers as an additional revenue stream.  These are called “educational scores” by the credit bureaus because they are NOT lending scores.

The credit score is calculated based on the information in the credit file of each consumer at the moment the score is calculated.  So if you have a perfect payment history up until right now, your credit score will reflect that.  If you skip a car payment next month, the lender reports it to the credit bureau, and then you check your score two months from now, it’s probably going to be quite a bit lower because the information on your report has changed.

Sometimes, smaller or local companies do not pay all three credit bureaus to report, so the account you have with them may only show up on one or two of your reports, which can cause a difference in your scores.

Collection accounts are often only on one or two of the credit reports.  Public records may not be on all three, either.  And then of course, there is human error.  If somebody transposes one digit of your social security number or birth date, it can lead to mixed identity and crossed credit files.

WHAT TO DO
Check your credit reports regularly.  You can catch errors before they lead to more complicated problems and tangled accounts.

Send correction letters to all three credit bureaus when you find errors.  Even you’ve only seen it on one of them, write to all three.  This article has tips on disputing inaccuracies.

Make sure that your accounts are reporting on all three of your reports.  For credit accounts with major, national lenders, they are usually on all three.  If not, contact the creditor and request that your account be reported to the bureau(s) that don’t have it on there.

Request your score disclosure page from your mortgage lender.  They are required to give you your three credit scores that they used while considering your application.  If one of the three is significantly less than the others, it may be an indicator of mixed identity or other major errors on that bureau’s credit file they have on you.

Lastly, keep in mind that lenders often look at your middle, or “mid” score to determine loan eligibility.  If all of your scores are above their required minimum, the few points difference among them probably doesn’t matter much for your financial well being.