A credit score helps determine whether a business will get a loan, at what interest rate, insurance premiums, if suppliers will extend credit, and many other applications. It comes as a surprise to many that not all credit scores reported by different agencies are the same. Even though there are common components of all credit scores, there may be subtle differences that can make a big difference.
Is there a “best credit score” when there are differences between what is reported by credit bureaus? In most cases, the higher the score, the better. But there can be instances where, depending on why the credit scores are different, that this may not be the case. Let’s explore two specific reasons why a business credit score as reported by one agency might vary compared with one as reported by another.
Scoring Model Differences
A credit score can differ if the inputs into the calculation are not the same across the board. Each credit agency may use a different scoring model, resulting in close, but unequal, credit scores for the same business. While the differences most likely do not result in dramatically dissimilar scores, it is fairly common for each agency to report a slightly different credit score because of unique scoring models.
Obviously, the highest one would commonly be considered the best credit score. This might not always be the case.
As previously mentioned, most scoring models are similar. But some agencies use dynamic models, and this may result in different credit scores. For example, one credit agency might place greater weight on overall financial activity while another considers credit utilization more strongly. A business that focuses on overall financial strength, rather than percentage of credit utilization, would probably score higher with the former credit bureau. That does not necessarily make one credit score better than another.
Credit Data Discrepancies
Each agency might have different data. When a business establishes credit accounts, in order for trade data to show up on a credit profile it must be reported. Creditors and lenders might report trade data to one of the agencies, but not to all. Also, agencies collect data independently so that one agency might have information that another does not.
Again, the higher score would almost always be considered the best credit score. While this may be the case, the better score might be the one that has the most accurate, updated information. An agency that has more complete information is generally a better long-term credit partner.