A CBC Marketplace investigation has revealed that consumers are likely to have significantly different credit scores depending on which online credit score service they use.
Marketplace asked three Canadians to check their scores using the following websites: Borrowell, Credit Karma, which are both free, and TransUnion and Equifax, which charge around $20 a month to use (full disclosure, Borrowell is a partner of ours). Each participant received four different scores across each website — and the largest gap between two scores for the same person was 125 points.
Raman Agarwal, a 58-year-old small business owner from Ottawa who doesn’t have much debt and pays his bills by the due date, received the following scores from the four sites:
- Borrowell: 637, which the site considers “below average”
- Credit Karma: 762, which the site considers “very good”
- Equifax: 684, which the site considers “good”
- TransUnion: 686, which the site considers “poor”
“That's so strange,” Agarwal told CBC Marketplace when he learned of the variance in his scores. “Because the scoring should be based on the same principles. I don't know why there's a confusion like that.”
The real shock came, however, when Agarwal agreed to let a mortgage broker do a “hard check” in order to obtain his FICO score, which is what 90% of Canadian lenders use, including major banks, when determining if they’ll loan you money and on what terms. FICO is an American company, but it sells its score to Equifax and TransUnion.
Agarwal’s FICO score was 829 — which is considered “excellent.”
“Oh my god!” he said in response. “I am really happy, but totally surprised.”
CBC Marketplace asked the four websites about the discrepancies between their score and Agarwal’s FICO score but said none could provide a detailed answer.
Borrowell CEO, Andrew Graham, did comment, however, on the confusing and discrepancy-laden nature of Canada’s credit scoring/reporting system.
“So there are many different types of credit scores in Canada ... and they're calculated very differently,” he said. “It's a complicated system, and we're the first to say that it's frustrating for consumers. We're trying to help add transparency to it and help consumers navigate it.”
So many factors go into determining your credit score, including if you pay your bills on time; how much credit you have access to versus how much you use; how long you’ve been borrowing for; the types of credit you have; and how much you owe overall.
Agarwal thinks there should be one uniform scoring metric that all credit reporting agencies follow.
“There should be one score,” Agarwal said. “If they are running an algorithm, there should be one score, no matter what you do, how you do it, should not change that score.”
Doug Hoyes, co-founder of Hoyes, Michalos and Associates Inc., a licensed insolvency trustee firm in Toronto, expressed the same sentiment to CBC Marketplace.
“How can you be poor somewhere and fantastic somewhere else?” he said.