Many people ask me these questions regularly, "How much of an impact does pulling my credit have on my score?" and "why does one bureau have a lower score than the other two?"
To answer these questions here is an example from my own personal credit report dated 8/24/10:
Experian
- Inquiry by Frontier Communications on 7/20/10 (1 month old)
- Inquiry by Verizon Wireless on 1/23/09 (19 months old)
- Time between applications of credit is 18 months.
Equifax
- Inquiry by Ball State Federal CU on 11/9/09 (9 months old)
Trans Union
- No inquiries in the last 24 months.
This difference in inquiries is a good example to illustrate why the three credit bureaus can calculate different credit scores. Pulling credit costs money to the lender. For many transactions, only one credit bureau will be pulled on an applicant. Other than loans like mortgages there is really no reason for lenders to spend money on more than one credit bureau. Pulling three reports will cost more than pulling one report.
Frontier Communications (we just added a new phone line) can quickly determine that I pay my bills by viewing just one credit report. My guess would be that Experian provides Frontier with better pricing than Equifax or Trans Union do. Verizon pulled my credit 19 months ago when I added a wireless card for my computer. Ball State Federal Credit Union obviously likes the pricing from Equifax. And clearly in my local market (Indianapolis), Trans Union is not the preferred provider choice since there were no inquiries.
What’s telling is that my credit score with Trans Union which had no inquiries was the highest score (8 points higher than Equifax which had one inquiry and 11 points higher than Experian which had two inquiries). The more inquiries, the lower the credit score.
The scoring system looks for changes in consumer behavior for the Activity portion of the credit score. With Experian (my lowest score), I had two inquiries but more importantly one of them was only a month old, hence the lowest score. All three credit bureaus had the same pay history, number of accounts open and all three showed a paid off auto loan in March 2010. (I now have a smart car…meaning paid off).
If I would suddenly open a number of new accounts in a time frame shorter than 2 in 19 months (my current pattern), Experian would indicate that my credit activity was changing by lowering my credit score. Or if I suddenly started closing a number of accounts (not likely since I only have 5 open accounts), Experian would view this as a change in pattern and might lower my score.
The highest score given was by Trans Union with zero inquiries on my credit. Remember that all other factors were equal….in other words, less activity is better for your score.