Credit Scores Vary - Depending on Who Pulls it

By R. David Michaels

When a creditor obtains your credit score, the odds are great that it will differ from the score you obtained. This can occur even where both of you seek a score at the same time. There are several reasons for this, and it is important you understand them so you can obtain a similar result as your creditor.

   The first reason is that it depends upon which of your three credit reports the score is based upon. Your credit score is based solely upon the information contained in your credit report. The reporting of your credit information is voluntary, so your creditor may report that information to only one of the three National Credit Reporting Agencies (NCRA). That means that what is on your report from Equifax can differ from that contained on the reports from Experian or TransUnion. A missing trade line with a stellar history or a missing collection account will result in a huge point swing from a report that contains that information.

   Differing credit scores can result even where a creditor and you use the same report. That can occur when different scoring models are utilized. FICO has numerous models, but the NCRAs sell their own alternative score models, with VantageScore being the most widely known. However, over 90% of creditors use a FICO model. If you want a score that counts in the credit industry, make sure the score you obtain is from a FICO score model. Swings of 100 or more points can result between scoring models using the same credit report because the variables they use are applied differently.

   Amongst FICO's numerous score models, the latest is FICO 9. It is very advantageous to consumers because it does not use medical accounts or paid collection accounts in the score equation. The problem, however, is that it is a new model and few creditors have implemented it. Mortgage lenders are required by Fannie Mae and Freddie Mac, the two largest purchasers of mortgages, to use the FICO 8 score model. That will not change anytime soon, as in late 2018 these governmental entities declined to implement the use of FICO 9.

   Assuring the score you obtain is similar to that which your creditor obtains is an important precursor to seeking credit. Aside from verifying your credit report is free of errors, your first step should be to ask your potential creditor which NCRA's report and which scoring model they will use to calculate your score.

   Notice I said potential creditor. A huge error many consumers make is that they do not shop around when seeking credit. When you buy a vehicle or home, you rarely buy the first thing you see. Rather, most of us shop the market for a better deal. Why should it be any different when you seek credit?

   As creditors reach differing results on your creditworthiness, they will have different interest rate offers. A creditor that uses a FICO 9 model will likely give you a better interest rate, as will a creditor that uses the credit report that garners a better score. Some creditors use their own scoring models or policies that net different results than the creditor down the street. It seems obvious that you want the lowest rate, and you can only find a different rate if you shop around for it.

   It is in your financial interest to expend the effort to assure you have an accurate credit score before you seek out a new credit line. Likewise, play creditors against each other to obtain a deal that will save you money. The savings from assuring you have the highest possible credit score when seeking credit will give you leverage when shopping around for the best rates. Credit scores and credit offers are not equally created, and that can be to your advantage if utilized properly.

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