Why Do Credit Scores Vary Between Providers?

Canadian consumers have several options when it comes to obtaining their credit score.  They can get their credit scores via the two national credit reporting agencies, Equifax Canada and TransUnion. In addition, they can get them through free credit score providers such as Borrowell, Mogo and Credit Karma.

Each provider uses slightly different models to weight credit score factors, which is why consumers can get different results from different providers, even if they requested their credit scores on the same day. For example, a consumer might get a credit score of 760 on Equiax, 800 on Borrowell and 770 on TransUnion.

So why do we have more than one credit score? And which provider should we use if we’re applying for a mortgage?

To answer those questions, we first must explore the models that are used to calculate credit scores. Anyone who has a credit account, such as a credit card or loan, has a credit report. This credit report indicates how you manage your money and it’s used to create your credit score. Mortgage lenders rely on these credit reports and scores to determine whether to extend you credit.

The FICO Score is one of the credit scoring systems used in Canada by banks and lenders. Formerly called the Beacon Score, it’s a mathematical formula that pulls numbers from your credit report to assign you a score between 300 and 900. Consumers with a score of 650 and higher are placed in the lower risk category because they have demonstrated responsible credit behavior in the past. Of course, the higher your score, the better you look to mortgage lenders.

Another scoring system is the Equifax Risk Score (ERS), which is a credit score model by Equifax that’s used by lenders and institutions to determine a consumer’s likelihood of going 90+ days delinquent within 12 months. This model is used by Borrowell, a free credit score provider and partner of Equifax. Unlike scores available through Equifax.ca, Borrowell’s scores are calculated using information about a consumer’s mortgage repayment history. If you’re applying for a mortgage, it might be more beneficial to get your credit score through providers that include mortgage repayment information into their calculations.

There are many more scoring models on the market. Different providers simply use different scoring models that weight information differently but in general, these algorithms look at similar factors when calculating a consumer’s credit score. These factors have set percentage weights and include things like the consumer’s payment history, utilization rate, current debts, length of credit history, new credit accounts, and types of credit used.

The next time you pull up your credit score and get different results from different providers, don’t fret. It’s perfectly normal. It doesn’t mean that one score is more accurate than the other score. They are simply calculated based on different scoring models. Some scores are used for educational purposes, while others are based on certain lending criteria. What’s important is that if you do plan to compare scores across different providers, make sure to do so at the same time since your credit report can change from month to month.