Experian vs. Equifax

 Experian and Equifax are two of the three primary credit bureaus in the U.S., with TransUnion being the third. Both Experian and Equifax collect credit information on consumers across the country, which they sell to lenders and financial institutions as your collective credit report. These lenders then leverage the information in the reports to assess whether or not you are creditworthy. And though some financial institutions and lending agencies may decide to use one bureau, both, or all three, it’s important to know that while they work similarly, there are some differences. This article will cover the main differences between Experian vs. Equifax. 

Highlights & Key Takeaways 

• Experian and Equifax are two of the three main credit bureaus in the U.S.
• Consumers have credit reports and credit scores with Experian and Equifax.
• Experian and Equifax have slightly different methods for calculating credit scores. 
• The average credit score in the U.S. is 714, and if your score is lower, you should take steps to improve it 

What Are the Main Differences Between Experian and Equifax?

If you’ve ever looked at your credit reports from the various credit bureaus, you’ve likely noticed a slightly different score on each. This is because each credit union looks at your borrowing behaviors and financial habits differently, resulting in a different score. But as a consumer, it can leave you scratching your head trying to understand the differences between Experian vs. Equifax. So we’ve boiled down the key differences for you below.

What is Experian?

Founded in 1980 as CCN Systems as a credit referencing agency in the UK, and later in 1996, when the company merged with TRW Information Systems, Experian is a global information services company that provides data and analytical tools to help businesses and individuals manage credit risk and prevent fraud. In simple terms, Experian collects data on individuals' financial behaviors and is most known for compiling that information into usable credit reports for lenders to determine creditworthiness.

Your credit report is vital in helping lenders determine your credit score. The higher your credit score, the more likely you are to be approved for loans and other credit products with low-interest rates, such as personal loans for good credit. Further, the better your credit score, the higher borrowing limits and flexible borrowing terms you can get.

Check out the primary products offered by Experian.

• Free credit monitoring - Alerts individuals of any changes or suspicious activity on their credit report.
• 3-bureau reports and FICO scores - Provide credit reports and credit scores from all three major credit bureaus. The benefit here is that you can access all three credit reports and scores to identify potential errors and areas for improvement to increase your chances of approval for things like personal loans for excellent credit. Many lenders will also look at the average of your three scores across all bureaus to determine your credit score.
• Annual credit report - Consumers can request a free credit report once a year.
• Experian CreditLock - Allows individuals to lock and unlock their Experian credit report
• Credit file disclosure - Provides individuals with a copy of their credit report, which contains information about their credit history, such as credit accounts, payment history, and inquiries. Lenders use this information to evaluate an individual's creditworthiness and determine whether to approve them for credit.
• Credit score disclosure  - Provides individuals with their credit score, which is a numerical representation of their creditworthiness via a score ranging between 300 and 850, based on the information in their credit report. Lenders use credit scores to quickly assess an individual's creditworthiness and determine their likelihood of repaying a loan.

How Does Experian Calculate Credit Score

Experian, similar to FICO, uses a proprietary algorithm to calculate credit scores, which considers your payment history, amounts owed, length of credit history, credit mix, and new credit. The weight given to each factor is slightly different, with payment history and amounts owed carrying the most weight, while new credit carries the least weight.

• Payment history: 35%
• Amounts owed: 30%
• Credit history: 15%
• Credit mix: 10%
• New credit: 10%

Experian Credit Score Ranges

Understanding your credit score can be helpful in that it tells you whether or not you are likely to be approved for a credit product and if you are eligible for competitive rates and terms. Experian provides a credit score between 300 and 850, similar to FICO. Those ranges are:

• 300 to 579: Poor
• 580 to 669: Fair
• 670 to 739: Good
• 740 to 799: Very good
• 800 to 850: Excellent

However, Experian calculates their own credit score based on their proprietary algorithm, lenders can use different credit scoring models, such as FICO or VantageScore, using the information available in the Experian credit report. This means that your credit score may differ based on the model used by the lender, even if the information in your credit report is the same. 

To that end, some credit scoring models have their own range and criteria for evaluating creditworthiness, which can lead to differences in credit score interpretation and lender decision-making.

What is Equifax? 

Equifax was founded in 1899 as the Retail Credit Company in Atlanta, Georgia. Over time, they have become one of the primary leaders in helping businesses make more informed decisions. Like Experian, Equifax collects and aggregates consumer data from various sources, including financial institutions, credit card companies, and public records, to create your credit report. Lenders and creditors use this information to determine your creditworthiness and ability to manage additional credit. 

Check out the primary products offered by Equifax.

• Equifax Complete Family Plan - This credit monitoring and identity theft protection product is designed for families. You can access scores for two adults and up to four children. 
• Equifax Complete - Provides credit reports and scores, alerts to big changes to your credit score and report, and up to $1 million in protection against identity theft.
• Equifax Complete Premier - A comprehensive credit monitoring and identity theft protection service that includes credit reports and scores, alerts for critical changes to credit files, credit report lock and unlock features, and up to $1 million in identity theft insurance.
• Equifax ID Patrol - Protects against identity theft with tools such as credit monitoring, alerts for suspicious activity, and assistance resolving identity theft occurrences.
• Equifax Credit Monitor - A credit monitoring service for consumers that provides alerts to critical changes in your credit file and also provides access to your credit score and reports.
• Equifax Core Credit - Designed for businesses to provide credit reports and score monitoring services to help them manage risk and make informed credit decisions about prospective borrowers.

How Does Equifax Calculate Credit Score

Equifax has a slightly broader credit score range than Equifax and FICO, with ranges between  280 and 850. Similar to Experian (and TransUnion), Equifax uses a proprietary scoring model called an algorithm to calculate your credit score. The score considers certain factors such as payment history, amounts owed, length of credit history, the mix of credit, and recent credit inquiries. 

The score then gives lenders a quick and easy way to assess an individual's creditworthiness.

• Payment history: 35%
• Credit utilization: 30%
• Credit history: 15%
• Credit mix: 10%
• New credit: 10%

Equifax Credit Score Ranges

As we’ve said, understanding your credit score can help you know what to expect when lenders and creditors decide about your creditworthiness.

• Poor: 280 to 559
• Fair: 560 to 659
• Good: 660 to 724
• Very good: 725 to 759
• Excellent: 760 to 850 

Like Experian, Equifax also uses its proprietary algorithm to calculate credit scores, which can result in different scores for the same individual. Similarly, lenders may use various credit scoring models, including FICO and VantageScore, to evaluate your creditworthiness when you submit a credit application. For this reason, your credit score may differ depending on the model used by the lender, even if the information in your Equifax credit report is the same. 

Which Credit Bureaus Do Lenders Use?

The benefit of the varying credit bureaus is that lenders can use which bureau they want. They can pull data from all three and decide to use Experian vs. Equifax or vice versa. It all depends on the lender’s preference and the loan or credit application they are reviewing. 

The most commonly used credit scoring models are FICO and VantageScore. Most lenders, including mortgage lenders, credit card issuers, and auto loan providers, use FICO scores. FICO scores range from 300 to 850, with 670 or higher considered good credit. VantageScore, on the other hand, is used by fewer lenders but is gaining popularity. VantageScore 3.0 and 4.0 range from 300 to 850, with a score of 661 or higher considered good credit.

Most lenders use data from all three major bureaus, Experian, Equifax, and TransUnion, to evaluate your creditworthiness. However, some lenders may only use one or two bureaus, leading to different credit scores and reports. For example, a lender may only use Equifax data for a specific type of loan, while another lender may rely solely on Experian data for credit card applications. It's essential to check your credit reports from all three bureaus to ensure accuracy and identify any potential errors that could affect your credit score. If you find an error, file a dispute with the appropriate bureau.

Mortgages

Because of the high amount affiliated with mortgages and home buying, banks typically use a slightly different credit score model to evaluate applicants. Here’s what you should know about the scores used when you are looking to finance a home purchase.

While the FICO 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage:

• FICO® Score 2 (Experian)
• FICO® Score 5 (Equifax)
• FICO® Score 4 (TransUnion)

The three main credit bureaus (Equifax, Experian and TransUnion) use a unique version of the industry-specific FICO Score. FICO tweaks and tailors its scoring model to best predict creditworthiness based on the bureau and industry. However, consumers are still evaluated on the same core factors, including payment history, credit use, credit mix, and age of your accounts. But, each category has a slightly different weight.

In summary, FICO 8 is more critical of high balances on revolving credit lines. In contrast, FICO 2, 4, and 5 models are suitable for evaluating mortgage candidates as they put less emphasis on credit utilization. This all makes sense because taking out a mortgage requires a different mindset than keeping track of your credit card balances and personal loan payments. 

Credit Cards

Credit card issuers typically use the FICO score model when evaluating credit card applications. However, credit card issuers often pull credit reports from all three major credit bureaus (Equifax, Experian, and TransUnion) to obtain a complete picture of an applicant's creditworthiness. 

Since each bureau may have slightly different information on file, the credit score generated by each bureau may also vary. Unfortunately, applicants won't know which credit bureau an issuer used unless their application is denied. To that end, the steps to improve your credit score are consistent across all three bureaus. 

Auto Loans 

Similar to how the mortgage industry uses different credit scoring models so does the auto industry. The auto credit score, called the auto-enhanced credit score, emphasizes your payment history with past auto loans and leases. If you have a history of timely auto loan payments, the lender may see a higher auto score than your standard FICO score. However, if you have been delinquent on past auto loans, this could negatively affect your automotive-weighted score, and lenders may see a lower score than your regular FICO score.

Auto lenders typically use one of these scoring models:

• FICO 8 and 9: These are the most recent FICO scoring models and widely used by lenders, including auto lenders, as a base credit score for reviewing auto loan applications.
• FICO Auto Scores - These are industry-specific scores created explicitly for auto lenders. They are based on a generic FICO Score and then adjusted to predict better your probability of repaying an auto loan on time. Auto loan repayment history is a critical factor in determining FICO Auto Scores.
• VantageScore 3.0 and 4.0: These are the latest versions of the credit scoring model created by VantageScore, a credit scoring agency founded by the three significant credit bureaus (Experian, TransUnion, and Equifax). According to a 2017 report, over 70% of new auto loan and lease decisions from July 2016 to June 2017 were based on a VantageScore credit score, making it a popular option for auto lenders.

Keeping on Top of Your Credit

Consumers must understand that staying on top of their credit is one of their fiscal responsibilities. The truth is that your credit score can have a big impact on your life. Not only does good credit help you get access to more competitive loan rates and better borrowing opportunities, but it can also affect your chances of obtaining employment. 

Checking Your Credit

Staying on top of your credit score is necessary and there are a few ways that you can do it. And the Fair Credit Reporting Act (FCRA) makes it so that every consumer is entitled to one free credit report from one of the three bureaus each year. FCRA aims to promote consumer information's accuracy, fairness, and privacy in consumer reporting agency files.

Checking your credit report and score often ensures that creditors make decisions based on accurate data. So, if you find an error, you can dispute it, and your credit score will improve. Also, checking your credit score periodically can help tell you if there has been a significant change in your score. If you can’t easily explain why your score changed, it’s a good indicator that you should go check that report.

Here’s how to access your credit report.

• Experian
  • Free credit score
  • Free credit report
• Equifax
  • Free credit score
  • Free credit report 

You can also check your credit report for free at annualcreditreport.com. 

Contacting the Credit Bureaus

Sometimes, you might need to contact a credit bureau, such as Experian or Equifax. One common reason is to dispute errors or inaccuracies on your credit reports, such as fraudulent accounts or incorrect personal information. Other reasons may include freezing or unfreezing your credit report, requesting a credit report, or placing a fraud alert on your credit file. 

To contact Experian, individuals can visit their contact page, which provides options for phone support, email support, and a mailing address. 

Equifax's support page offers similar options, including phone and email support and a live chat feature for immediate assistance.

Improving Your Credit    

The average credit score in the U.S. is 714, which falls neatly within the good range of the FICO scoring model. If your score is below 714 or falls in the fair or poor range, you must take steps to improve your credit score. And even if you have different credit scores with Experian and Equifax, the same habits can help your credit score improve with both and TransUnion.

Here are some of the best strategies you can take to improve your credit score.

• Pay your bills on time, all the time. This represents 35% of your credit score. And conversely, failing to make a payment on time and not making it up within 30 days can result in the creditor reporting your late payment to the credit bureaus. This can impact your credit by up to 180 points.
• Pay down your debt. The more money you owe, the more you need to consider in your monthly budget towards that particular debt. This can make it that much more challenging to pay your monthly minimums if an emergency were to strike. Further, the more debt you have, the worse your debt-to-income ratio appears to would-be creditors.
• Keep your credit utilization low. Credit utilization represents how much you owe on your credit cards and personal loans compared to your credit limits. The higher your credit utilization, the lower your credit score. The rule of thumb is to keep your utilization under 30%.
• Get credit for rent. Experian Boost lets you get credit for paying for your rent, streaming services, and more. And signing up is free.
• Be mindful when applying for new credit. Every time you apply for new credit, it results in a hard credit check. Try to wait six months to apply for a new line of credit as a hard inquiry usually results in a five to 10-point reduction in your credit score.
• Consider a secured credit card or credit-builder loan if your credit score is exceptionally low. A secured credit card is a type of credit card that requires a cash deposit as collateral, and the credit limit is typically equal to the deposit amount. A credit builder loan is a type of loan where the lender holds the loan proceeds in a savings account, and the borrower makes monthly payments that are reported to the credit bureaus to build credit history.
• Dispute credit report errors if you see one. The most common types of credit report errors include identity errors, incorrect reporting of account status, data management errors, and balance errors.

Final Word

Whether it’s Experian vs. Equifax or the other way around, credit bureaus collect and provide credit information to lenders, but use slightly different algorithms and scoring models to calculate credit scores. While some lenders may prefer one bureau over the other, it's important to note that both credit bureaus play a big role in your overall credit profile. Regardless of which bureau is used, the same set of good habits can help credit scores improve with both Equifax and Experian, including paying bills on time, keeping credit utilization low, and monitoring credit reports regularly.